Lexplug logoLexplug

King v. Stoddard

California Court of Appeal
28 Cal.App.3d 708, 104 Cal. Rptr. 903, 1972 Cal. App. LEXIS 785 (1972)
ELI5:

Rule of Law:

The indefinite continuation of a partnership's business by a surviving partner after dissolution by death does not constitute an act 'appropriate for winding up partnership affairs,' and therefore does not bind the deceased partners' estates to new obligations incurred during that continuation.


Facts:

  • Prior to 1962, the Walnut Kernel newspaper was a partnership owned by Lyman Stoddard, Sr. and Alda S. Stoddard (51% interest) and their son, Lyman E. Stoddard, Jr. (49% interest).
  • For approximately 10 years, accountants Harley King and Stanford White (and their predecessors) had provided services for the newspaper.
  • On January 3, 1963, Alda S. Stoddard died.
  • On February 13, 1964, Lyman E. Stoddard, Sr., died.
  • After his parents' deaths, the surviving partner, Lyman E. Stoddard, Jr., continued to operate the newspaper business for several years without formally liquidating it.
  • The executors of the deceased partners' estates, John L. Stoddard and Nancy Gans, did not participate in the business operations but were aware the accountants were continuing their work.
  • The executors were dissatisfied with the continuation of the business and made unsuccessful attempts to sell it, eventually suing Lyman Jr. to force an accounting and liquidation.
  • King and White continued to provide the same type of routine accounting services to the ongoing business from 1963 through 1968, believing the estates would be responsible for payment.

Procedural Posture:

  • Harley King and Stanford White sued the executors of the estates of Alda S. Stoddard and Lyman E. Stoddard, Sr., in a California superior court (trial court) to recover fees for accounting services.
  • The trial court entered a judgment in favor of King and White for $12,370, finding that the services were rendered during the process of winding up the partnership and were therefore a liability of the estates.
  • The executors of the Stoddard estates (appellants) appealed the judgment to the California Court of Appeal, First District.

Locked

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Does the indefinite continuation of a partnership business by a surviving partner, after the deaths of other partners, constitute an 'act appropriate for winding up partnership affairs' under Corporations Code section 15035, thereby making the deceased partners' estates liable for new debts incurred during that continuation?


Opinions:

Majority - Brown (H. C.), J.

No. The indefinite continuation of a partnership business after the death of a partner is not an act of winding up, and thus does not bind the deceased partners' estates to new debts. The dissolution of a partnership by a partner's death means the partnership continues only for the purpose of winding up its affairs, not for engaging in new business. An act 'appropriate for winding up' involves liquidating assets and settling pre-existing obligations, not conducting business as usual. Here, the accounting services were part of the ordinary course of the ongoing newspaper business, not part of a liquidation process. The fact that maintaining the business as a 'going concern' might have increased its sale value does not transform its continued operation into a winding-up activity. Furthermore, the estates of the deceased partners did not consent to the continuation; on the contrary, they actively sought to force a liquidation, which absolves them of liability for new debts incurred by the surviving partner's actions.



Analysis:

This decision narrowly construes the definition of 'winding up' partnership affairs, establishing a clear distinction between liquidating a partnership and merely continuing its business operations. It protects the estates of deceased partners from liability for new debts incurred by a surviving partner who fails to promptly settle the partnership's affairs. The ruling reinforces the surviving partner's fiduciary duty to liquidate the business upon dissolution, placing the financial risk of continuing operations squarely on that surviving partner, not on the estates of the deceased.

🤖 Gunnerbot:
Query King v. Stoddard (1972) directly. You can ask questions about any aspect of the case. If it's in the case, Gunnerbot will know.
Locked
Subscribe to Lexplug to chat with the Gunnerbot about this case.

Unlock the full brief for King v. Stoddard