OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
Honoreble Orrfll4 S, Carprntsr
Chalraan and Exeoutire Dlreotor
Tsxar Unemployment Compensation Comml4sion
Auetln, Terar
Dear Sir:
tlnulng oo-partnerehlp,
'I am attaoh tloles ot oopart-
114, an emplo~lng
employment com-
at these artdoles
ng partnership.
hip 4unlre4 all
T withAraw41, addition
neation Aot,
an employing
Eaah tlma 4 now
stkios (if it8 status 1s
oyor*r aooount number 14
rot up for it. The
44 refleoted by tho
ion of suoh
employer, thers-
reoord. That
other employer
nor can lt bo oharged against any other employer.'
,
Ron. Orville S. Carpenter, Page 2
Our attention is ilrst Socueed on paragraph S of the
Articles o? Copartnership, vthlch reads as followe:
"8. That upon the death or wlthdraral o? any mem-
ber o? the copartnershlp, the copartnerehlp shall not
terminate, and the estate o? the deceased partner or
withdrawing partner shall be deemed to have assigned,
transierred and set over to the oontinoing partner8
411 of hla right, title, and interest in and to the
said copartnerahip kitbout any iurther act upon the
part o? the estate o? a Aeoaaaed partner or o? such
ulthdrawing partner. The contlnulng copartnership may
be under this agreement or by executing 4 new agree-
ment. Upon the admission o? a new member or member8
to tbia copartnershlp either under thls agreement or
by a separate copartner&hip agreement, it shall be
deemed that all of the right, title and interest o?
the parties hereto in end to the said copartnership
are assigned, transierred and set over to the newly
constituted and/or continuing copartnership, which
shall assume 411 the obligations o? tble oopartner-
ship without any Surther act. The execution OS a new
oopartnerahlp agreement shall constitute 4 tendnation
o? tbia agreement without any iurther act.=
The effortrr o? the copartners to establish 4 continuing
partnerehlp arrangement must be oonsldered in the light of the
pertinent provisions o? our Texas Unemployment Compensation XAW,
Article 52321-b,Section 17 (a) o? Vernon*8 Revised Cirll Statutes,
1925, which reads in part:
"(e) *kmploying unit* means 4x1~~lndlvldual or type
o? organization,' ineludlng any partnership, association,
trust, estate, joint-atook oompany, lneuranae company,
or corporation, whether Aomestlo or foreign, or the
ireceiver, trustee in bankruptcy, trustee or euaceasor
thereof, or the legal representative o? a Aeoeased
person, which has or subsequent to January 1, 1936,
bad in Its employ one or more individuals periormlng
services tar it within thle State. . .*
Article 5221-b, Section 6 (A), Vernon's Revised Ci~ll
Statutes, 1925, provides as iollows:
256
Ron. Orville S. Carpenter, Page ?I
“(d) by employing unit rblcb is or become6 an
employer subject to this Act, and which under the pro-
visions of this subseotlon ceases to be 4n employer
subjeot to this Act and subsequent to such time be-
oomes an employer subjeot to this Act by reason o?
any of the provlslons hereof, shall upon again be-
ooming an employer subject to this Aot be considered
4 new employer without regard to any rights aoqulred
by it during the time that it had theretofore been
an employer .s
The ConStNCtiOn o? your Commission that every new legal
identity must be taken into oonslderatlon appears to be based
upon sound principles, the llabillty~ of an Employing Unit being
assessed against the members o? that unit. The law is well
settled that a retiring partner reroains liable to existing
oreditors, notwithstanding an assumption of debts by his succes-
sor or other partners, 32 Tex. Jurifa. p. 773; Reed VS. Shave,
274 t. Vi. 274; Shaw T. Green, 99 S. Yi. (26) 893. h?ter the
death of a partner, his estate 1s liable for partnership obll-
gations created prior to his death. See Shaw Ts. Kc)illlan,
24 E. PT. (26) 556; Rlgglns vs. Rettor, 46 Tex. 961; note 79
A.L.R. 153S, 1539.
In this factual sltnetlon the Articles of Copartnership
eridence 4 desire of the parties-that death or wlthArAwa1 autc-
matlcally transfer the interest of the Aeoeased or withdrawing
artnsr. The transfer of the interest may be so aocompllshed,
#iut does not clear this partner’s acaount. The Legislature has
erldenoed an intention ‘that ,any ohange in the ownership of a
business operating under any assumed name, 48 do Easklns and
bells, shall file an assumed name oeitl?iaater Artlele 5924,
Vernon’s Revised Clril Statutes, 1925. ,-The legislature aldo
thought that any change of ownership should be made lmown and
required it by Article ,6925, Vernon*8 Revised Clrll Statutes.
A penalty for failure to oomply with these provisions 1s pro-
Tided in Article 1070 of our Penal Code.
The purpose of the above legislation 1s for the pro-
tection of the public ln.deallng with suah 4 business. For the
determination of past and Suture obligations under the agreement
itself a new and different firm 82%6tS.
The agreement ?alls.to provide the method and propor-
tion of descent to surviving partners of the deceased or with-
drawing partners interest. X6 believe suah 4 situation
necessitates 4 new copartnership sgreenwnt. The wording of
.’ .
Eon. Orville %, Csrpenter, Ye&e 4
paragraph 8 smlfosts 4 rsallutlon of the partlea to the agree-
nent tbbat sew Artlolss of Copartnero&ip will doubtleas be ces-
essary upon death or *llthdr4ii41.
Paragraph LO of t&e Artlalos of Copartnereblp reads es
?ollows :
'10. That thls
agrsewnt SLlhll be In Suil Soroe and
etfaot until tendnsted by mutual consoat or the
parties horoto, or 44 hereinaboro >rovlAeA, or by the
glvlng of thirty doye* written notloe by two or mre
partlea holding 4 Eejority of Intorest, 4s boroln
provided, to the cther portles, and 4~ party hcreto
say withdraw trek tbe copertnrrshlp upon glrihg
thlrty Qys* written hotlce o? suah lntentlon to tho
other partit bcreto.*
Tho abeve 3rovleion etatoe t&et it shall remain *In full
Some and s??eot until terzinatod by Irutual oonocnt o? the
partlos hereto* or by withdraw41 o? two or rcore parties holding
a nmis)orlty of interest. 0411 attention
'Il'e to the partner
Arthur E. C4rter who owns elxty per 0e)nt of the partnership.
X?~this partner should withdraw to &horn and in what proportion
uould his fntereot pass. The obvious ?aZlure to attompt to dls-
pops o?thls snd other fact 8ltuat:ons that oen 4rlse *vlnoe
ths thought that 4 now 8gretumnt would bo drown up0
Thers lo 4 gener4lly reoogulssd priociplo of Zau that
tho business of 4 partnership my eontlnue arter death or Slth-
tlraral Q? 8 partner by spsol?lo agreemact or lnstruotlon in the
%-Illo? a Aeouised prtnsr. Howmr, the often cltod Texas
0484 on this point P.ltgslt v. 0. Sullivan 8nA Co.,' 99 T8xas
395, does not purport to ray that 4 oontlnuanoe of a baelness
1s tho sass partnarshlp.
M iDvestlg4tion of tbls prioofple and Its 4ppllcatlon
in other ~urisdlotions, wo tbltk, negetlvos any thought that it
18 the aaze partnership. Foople 1. Zanigan, 193 3. E. 70s;
hndrews v. E;tlnson,90 H. E. P2%. %'obelleve the len6uage
o? Chle? Justloe Carter of the Suprucs Court o? illlbol8 In the
laast olted 0480 1s most pcrtlnent hors. Ge quota;
*Were there are provisionsin the artlolsci of
agreement or will for tbi oontlnuanoe a? the busi-
ness after the death of oDe of the partners, it 1s
sometimes lhaecorately said that the death of the
partxr does not dlssolTa the partnership. I? the
.
Bon. Orville S. Carpenter, Page 5
business IS aarrlea on artsr the death of the
partner under such arrangement or by the agreement
OS the heirs or personal represautatlves of the
deceased, there is, In atteot ana in law, a new
partnerahlp, of vihloh the survivors and the exeou-
tom or heir8 are the meuberrs, the new embers be-
eomlng liable, as the old, to the creditors of the
ii=. 22 Am. E Eng. Eney. of Law (ea Ed.) 201, ma
ca888 oited; 1 'i;oerner*s Am. Law oi AdmInIstration
(26 Ed.) e 1231 Exchange Bank v. TraoF, 77 ~0.
594; mGrath v. Cowen, 57 Ohio St. 5S5, 49 R. E.
558; Kattfson V. Farnhaz, 44 tiM. 95 46 K. K.
547; JOMS A Cunnlnghamqs Pr. (2d Ed.1 82; T. Pars.
Partn. (Sd xa.) 459. See, also, 1Bates on Part-
nership, 8 52; Owens v. kackall, S5 kd. 582.
The great weight oi authority is to tkls effeot and to
U8 18 ConVinCiI@y Sound. Any atteniptbp these Article8 or co-
partnership for the remaining partner8 to a8sume the interest,
asset8 and llablllties of e deceased or withdrawing party over-
looks the right8 of oreditors. A further thought is that pereons
contracting mith thie firm may have done so because of the ability
of a partloular member. Thus, the oontract is one for personal
eervice and does not survive the rltharawalof a certain partner.
Via, therefore, advise you that a ohange in the person-
nel of the partnership rashlons a new partnership and should be
88t Up a8 a lleW GElpl‘OyilIfJ
unit.
Your8 very truly
ATTORMEYGl5WIALOF TEEAS
BY
A88iStMt
ATTORNEY
GENERAL
OF TEXAS
cOMMl3TEE