Coleman v. Coleman
170 S.W.3d 231, 2005 Tex. App. LEXIS 6557, 2005 WL 1971011 (2005)
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Rule of Law:
Under the Texas Revised Partnership Act (TRPA), when a partner in a partnership-at-will dies and the surviving partner continues the business instead of winding it up, the deceased partner's interest is automatically redeemed, entitling their transferee to the fair 'redemption price' of that interest.
Facts:
- Brothers Max Coleman and Robert Coleman were equal partners in a trucking business, Coleman Properties, which they started in 1980.
- The brothers operated without a written partnership agreement, making theirs a 'partnership at will'.
- On December 1, 2001, Robert Coleman died by suicide.
- Robert's widow, Debbie Coleman, was the named beneficiary of a life insurance policy in Robert's name and collected the proceeds.
- After Robert's death, Max Coleman did not wind up the partnership; instead, he continued to operate the business and use its assets, registering a new business name, Coleman Logistics.
- Debbie Coleman, as the transferee of Robert's interest, demanded that Max wind up the business and distribute the value of Robert's share.
Procedural Posture:
- Debbie Coleman sued Max Coleman in a Texas trial court, seeking the 'redemption value' of Robert's interest in their partnership.
- Following a bench trial, the trial court found in favor of Debbie Coleman.
- The trial court determined that Debbie was entitled to the redemption price because Max had continued the business instead of winding it up.
- The trial court rendered judgment against Max, awarding Debbie $161,500 (the redemption value less setoffs and credits), plus $20,000 in attorney fees and costs.
- Max's motion for a new trial was overruled by operation of law, and he (appellant) filed an appeal against Debbie (appellee) in the intermediate appellate court.
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Issue:
Does the Texas Revised Partnership Act entitle the transferee of a deceased partner's interest in a partnership-at-will to the 'redemption price' of that interest when the surviving partner forgoes winding up the business and continues its operations?
Opinions:
Majority - Justice O’Neill
Yes. The Texas Revised Partnership Act (TRPA) entitles the transferee of a deceased partner's interest to the redemption price when the surviving partner continues the business. The TRPA provides two distinct paths upon a partner's departure: winding up and liquidating the assets, or continuing the business and buying out the departing partner's interest. Because Max Coleman continued the business operations and did not liquidate the partnership assets, the provisions for winding up (which would limit recovery to the partner's capital account) do not apply. A partner's death is an 'event of withdrawal' that triggers an automatic redemption under TRPA § 7.01 if the business is not wound up within 60 days. The court rejected the narrow interpretation that only a 'partner' and not a 'transferee' like Debbie could claim this redemption right, reasoning that such a construction would defeat the statute's overall intent to provide a fair recovery and prevent the surviving partner from unjustly retaining the value of the ongoing business.
Analysis:
This decision clarifies the rights of a deceased partner's heirs or estate (transferees) in a partnership-at-will under the TRPA. It prevents a surviving partner from exploiting a statutory ambiguity by continuing the business to avoid a fair value buyout, which is typically higher than a simple capital account balance. The ruling establishes that the right to redemption at fair value passes from the deceased partner to their transferee, ensuring the interest is valued as part of a going concern, not on a liquidation basis, when the business continues.
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