Interest of a deceased Partner in the Stock in a Company. - Partner resigning his Interest, whether still liable to Company Creditors?
Blair of Dunskey v. Douglas, Heron, and Company
Date: 15 February 1776 Case No. No. 22.
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One of the articles in the contract of copartnership of Douglas, Heron, and Co. was, “That, in the event of the death or insolvency of any partner, his heirs or creditors should be obliged to receive his share in the stock and profits, as it should stand at the last preceding settlement of the company's affairs, with interest thereon till payment.” And another article provides, “That the company's books shall be brought to a balance once every year.” Blair of Dunskey, one of the partners, having died, in October, 1772, his executor brought action for payment of his two shares of the stock, and profits due on it, as at the last preceding settlement, viz. November, 1771; by which means the executor hoped to avoid the loss from the supervening bankruptey of the company, which happened soon after Mr. Blair's death. Urged in defence, 1mo, The first article above mentioned imports only a ’ stipulation in favour of the company: It obliged the executors and creditors of a decreased partner to receive, but did not oblige the company itself to pay, according to the last balance. 2do, Supposing a mutual obligation, it could be made effectual only out of the stock and profits of the company, not out of the private estates of the partners; and the stock and profits were annihilated. In June, 1772, before the death of Mr. Blair, the company, as the last resource of their expiring credit, had raised a large sum by annuities; and the company was then considered as on its death-bed. Answered, on the first head, That as, in the event of the company having gained profits posterior to the settlement in November, 1771, Mr. Blair's executors would have had no right to any share of such profits; so, on the other hand, the company having incurred loss since that period, they cannot suffer from such loss. Answered, on the second head, That though the company's credit was for a short time suspended, they were not bankrupt till August, 1773; they were bound by their articles of copartnership till that period; these articles fix the interest of the deceased partner in the company's stock and profits as it stood in November, 1771; and at that time there was sufficient stock and profit to divide. The Lords, on a hearing in presence, found, That as it is asserted by the defenders, and not denied by the pursuers, that betwixt the balancing of the company's books in November, 1771, and Mr. Blair's death, the said company became totally insolvent, therefore the defenders are not accountable to the pursuer for the value of the deceased partner's share, as at the balancing of their books in November, 1771. See Appendix.
Fol. Dic. v. 4. p. 290.
*** This judgment was affirmed, on appeal to the House of Lords, April 30, 1777.
