Credit Bureaus of Merced County, Inc. v. Shipman

California Court of Appeal Feb 6, 1959 No. Civ. 9496Published

Before: Schottky

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Holding. A retiring partner remains liable for partnership debts incurred after dissolution if the creditor had previously extended credit to the partnership and lacked actual notice of the dissolution, as publication alone is insufficient to discharge such liability.

Issues

Whether a retiring partner is liable for debts incurred by a successor entity when creditors lacked actual notice of the partnership's dissolution.
Whether the acceptance of payments from a successor entity constitutes a novation discharging the retiring partner from liability.
Whether the trial court abused its discretion in awarding attorney's fees provided for in the original contract.

Disposition. affirmed

Quotations verified verbatim against the opinion

“As to firms having prior credit dealings with the partnership, actual notice of dissolution is necessary.”

“A retiring partner is not justified in placing sole reliance upon the publication of notice of dissolution, but should assure himself that existing creditors who have extended credit to the partnership receive actual notice of such dissolution.”

“There can be no novation where the creditor testified he had no knowledge of dissolution and such testimony is believed by the trier of the fact.”

SCHOTTKY, J.

Donald E. Davis has appealed from the judgment entered in the above-entitled actions which were consolidated for trial. By the judgment Davis was held liable for a debt incurred by a partnership of which he was a member and attorney’s fees, and for two other debts, one of which was incurred in the name of the partnership after the entity was dissolved.

Donald Davis and Russell Shipman formed a partnership in 1954 under the name of Shipman & Davis Lumber Company. On September 20, 1955, the partnership was dissolved by written agreement. A notice of dissolution was published

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in a newspaper of general circulation in the county where the business was conducted, and an affidavit of publication was filed with the county clerk. No actual notice of dissolution was given to firms which had extended credit to the partnership at the time of dissolution. By the agreement Shipman, who was to continue the business, was to pay all the debts of the entity. Shipman continued the business as a sole proprietorship for a short time until a successor corporation, Shipman Lumber Servaes Company, was formed. In March, 1955, the partnership had purchased a calculator from the Valley Typewriter Company. The contract of sale provided that the unpaid balance of $457.20 would be paid in 12 installments of $38.10. At the time of dissolution the sum of $255.40 was owing to the Laird Welding and Manufacturing Company. The sum of $255.40 was paid to Laird Welding and Manufacturing Works on November 17, 1955, but this amount did not include the item of $54.48 for repairs made on November 3, 1955, but which was not entered on the books of the Laird Welding and Manufacturing Works until after the payment on November 17th, nor did it cover charges for demurrage on oxygen or acetylene cylinders furnished by Laird Welding and Manufacturing Works, or charges for cylinders which were either lost or not returned, said charges amounting to $135.33.

Commencing in 1956, Merced Hardware and Implement' Company, a firm which had previously done business with the partnership, sold merchandise on credit to the successors. The charge for this merchandise, amounting to $538.38, was entered on the books of Merced Hardware and Implement Company in the name of Shipman & Davis Lumber Company.

Credit Bureaus of Merced County, Inc. v. Shipman

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SCHOTTKY, J.

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