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Creel v. Lilly - 354 Md. 77, 729 A.2d 385 (1999)

Rule:

Maryland's Uniform Partnership Act, Corporations and Associations Article, Md. Nat. Res. Code Ann. § 9-101 et seq., does not grant the estate of a deceased partner the right to demand liquidation of a partnership where the partnership agreement does not expressly provide for continuation of the partnership and where the estate does not consent to continuation. Further, where the surviving partners have in good faith wound up the business and the deceased partner's estate is provided with an accurate accounting allowing for payment of a proportionate share of the business, then a forced sale of all partnership assets is unwarranted. 

Facts:

In 1993, the decedent Joseph Creel began a retail business selling NASCAR racing memorabilia. His business was originally located in a section of florist shop owned by his wife, plaintiff Anne Creel. In 1994, the decedent entered into a partnership with respondents Arnold Lilly and Roy Altizer to operate "Joe's Racing." The decedent died on June 14, 1995. Mrs. Creel was appointed personal representative of his estate. In accordance with Corporations and Associations Art., § 9-602(4), the partnership was automatically dissolved upon Mr. Creel's death, and because the partnership agreement did not expressly provide for continuation of the partnership nor his estate did not consent to its continuation, Lilly and Altizer requested that Mrs. Creel release the funds in the partnership account so that they could wind-up the partnership business. Mrs. Creel refused; Lilly and Altizer filed a lawsuit in Maryland district court. Just prior to that, Mrs. Creel had filed a lawsuit in Maryland district court against Lilly and Altizer, individually and doing business under the name "Good Ole Boys Racing," seeking an accounting and a declaratory judgment. She asserted that, instead of winding up the affairs of Joe's Racing in accordance with her demand, Lilly and Altizer continued the partnership business under a new name, using the assets of Joe's Racing. Ultimately, the circuit court ruled in favor of Lilly and Altizer. The court of special appeals affirmed, holding that Lilly and Altizer were under no duty to liquidate Joe's Racing on demand by Mrs. Creel and that Good Ole Boys was not a continuation of Joe's Racing, and as such the Creel estate was not entitled to continuation damages. Mrs. Creel was granted a writ of certiorari.

Issue:

Did Lilly and Altzer have a duty to liquidate the partnership on demand by Mrs. Creel, as personal representative of the decedent, who was Lilly's and Altzer's co-partner?

Answer:

No.

Conclusion:

The court affirmed the court of special appeals' judgment. The court ruled that Lilly and Altzer were under no duty "liquidate on demand" because the applicable Uniform Partnership Act, Corporations and Associations Article, Md. Nat. Res. Code Ann. § 9-101 et seq., did not mandate a forced sale of all partnership assets in order to ascertain the true value of the business. To hold otherwise vested excessive power and control in the deceased partner's estate. Further, a forced sale of all partnership assets was unwarranted because Lilly and Altzer in good faith wound up the business and provided Mrs. Creel with an accurate accounting allowing for payment of a proportionate share of the business. Finally, there was no basis for "continuation" damages because Lilly and Altzer’s subsequent partnership was a successor partnership.

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