Mrs. Cole made demand upon Ames and Bell for one-third of the profit of $200,000. They rejected her demand. What are the rights and remedies, if any, of Cora Cole as executor?
Ames, Bell, and Cole were equal partners in the ABC Construction Company. Their written partnership agreement provided that the partnership would dissolve upon the death of any partner. Cole died on June 30, and his widow, Cora Cole, qualified as executor of his will. Ames and Bell wound up the business of the partnership, and on December 31, they completed the sale of all of the partnership’s assets. After paying all partnership debts, they distributed the balance equally among themselves and Mrs. Cole as executor. Subsequently, Mrs. Cole learned that Ames and Bell had made and withdrawn a net profit of $200,000 from July 1 to December 31. The profit was made through new contracts using the partnership name and assets. Ames and Bell had concealed such contracts and profit from Mrs. Cole, and she learned about them from other sources. Immediately after acquiring this information, Mrs. Cole made demand upon Ames and Bell for one-third of the profit of $200,000. They rejected her demand. What are the rights and remedies, if any, of Cora Cole as executor?
At the time of winding up of partnership firm, all the partners of the firm are entitled to receive a share of profit or loss arising out of settlement of all partnership accounts. Partners share the profit in the ratio of their profit or loss sharing or equally among themselves. In this case, Partner A and Partner B are the surviving partners and surviving partners have the right to continue possession of assets and business for the purpose of dissolution, but they do not hold any right for making new contracts in the name of business. If the new contract made is within their clear authority, then the contract is binding to the partnership and the profit earned from new contracts will be distributed among all the partners. So, Mrs. C here, is entitled for equal share in the profit. They will also be liable to share loss, if any, arising from new contracts.
Mrs. C, being an executor, may hold the right to have equal share in the net profits earned by other partners in the name of partnership business as partnership belongs to all the partners and the partners are entitled to receive a share of net profit in the ratio of their sharing of profit and losses.