TITLE 14 CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS

Section 8. Partnerships, 14-8-1 through 14-8-64.

ARTICLE 3 CORPORATIONS ORGANIZED FOR RELIGIOUS, FRATERNAL, OR EDUCATIONAL PURPOSES

14-8-35. Actions which can bind a dissolved partnership; liability of partners.

After dissolution a partner can bind the partnership except as provided in subsection (c) of this Code section:
1. By any act appropriate for winding up partnership affairs or completing transactions unfinished at dissolution;
2. By any transaction which would bind the partnership if dissolution had not taken place, provided the other party to the transaction:
  1. Was a creditor of the partnership at the time of dissolution or had extended credit to the partnership within two years prior to dissolution and, in either case, had no knowledge or notice of such partner's want of authority;
  2. Though he had not so extended credit, had nevertheless known of the partnership prior to dissolution, and, having no knowledge or notice of dissolution, the fact of dissolution had not been advertised in a newspaper of general circulation in the place (or in each place if more than one) at which the partnership business was regularly carried on.
The liability of a partner under paragraph (2) of subsection (a) of this Code section shall be satisfied out of partnership assets alone when such partner had been prior to dissolution:
1. Unknown as a partner to the person with whom the contract is made; and
2. So far unknown and inactive in partnership affairs that the business reputation of the partnership could not be said to have been in any degree due to his connection with it.
The partnership is in no case bound by any act of a partner after dissolution:
1. Where the partnership is dissolved because it is unlawful to carry on the business, unless the act is appropriate for winding up partnership affairs;
2. Where the partner has become bankrupt; or
3. Where the partner has no authority to wind up partnership affairs; except by a transaction with one who:
  1. Was a creditor of the partnership at the time of dissolution or had extended credit to the partnership within two years prior to dissolution and, in either case, had no knowledge or notice of such partner's want of authority;
  2. Had not extended credit to the partnership prior to dissolution, and, having no knowledge or notice of such partner's want of authority, the fact of such partner's want of authority had not been advertised in the manner provided for advertising the fact of dissolution in subparagraph (a)(2)(B) of this Code section.
Nothing in this Code section shall affect the liability under Code Section 14-8-16 of any person who after dissolution represents himself or consents to another representing him as a partner in a partnership engaged in carrying on business.

(Code 1981, §14-8-35, enacted by Ga. L. 1984, p. 1439, § 1.)

COMMENT

Note to Uniform Partnership Act This section provides that a partner can bind the partnership after dissolution (1) by acts within his winding-up authority (unless the partner has become bankrupt) and (2) in other transactions that would have bound the partnership prior to dissolution where the third party had no knowledge or the specified notice of the dissolution or the acting partner's lack of winding up authority, except where the partnership was dissolved for illegality or the acting partner has become bankrupt. Dormant partners as described in subsection (b) are not personally liable for post-dissolution transactions.

Prior Georgia Law Prior O.C.G.A. § 14-8-92 was consistent regarding a partner's winding-up authority. Prior O.C.G.A. §§ 14-8-68 and14-8-92 appeared to eliminate all other post-dissolution power to bind. However, case law under prior O.C.G.A. § 14-8-92, which required the giving of notice of dissolution, was generally consistent with new § 14-8-35. See Bush & Hattaway v. McCarty Co., 127 Ga. 308, 56 S.E. 430 (1907) (creditor can recover for a post-dissolution transaction if he had no notice of dissolution, and non-creditor can recover if the firm has failed to publish notice of dissolution); Austin v. Appling, 88 Ga. 54, 13 S.E. 955 (1891) (dormant partner is not personally liable to post-dissolution creditor who was unaware of such partner's association with the firm). Prior case law was, however, inconsistent with § 14-8-35 in holding that notice of dissolution was unnecessary when dissolution was caused by death of a partner. Also, there were no prior provisions or case law comparable to paragraphs (c)(1) and (2).

Official UPA Subparagraphs (a)(2)(A) and (c)(3)(A) have been changed to provide that the partnership is bound for a post-dissolution debt to a pre-dissolution creditor who lacked knowledge or notice of the dissolution only if the creditor had extended credit within two years prior to the dissolution. This is based on the Texas version of § 35, Tex. Civ. Stat. Art. 6132b, § 35 (Vernon, 1970).

Cross-References Definition of "bankrupt": § 14-8-2(1). Definitions of "knowledge" and "notice": § 14-8-3. Partner's power to bind the partnership in pre-dissolution transactions: §§ 14-8-9 and14-8-18(8). Partner's liability for pre-dissolution transactions: § 14-8-15. Partnership by estoppel: § 14-8-16.

JUDICIAL DECISIONS

General Consideration

Editor's notes.

- In light of the similarity of the statutory provisions, decisions under former Code 1882, § 1895; former Civil Code 1895, § 2634; former Civil Code 1910, §§ 3163, 3164, 3176; former Code 1933, §§ 75-108, 75-208, in effect prior to the 1984 repeal and reenactment of this chapter, are included in the annotations to this Code section.

Tax liability.

- Surviving partner is liable for burden of taxes upon partnership property within the partner's possession and control until the partnership has become extinct by a complete "winding up" of all its affairs. Ledbetter v. Farrar Lumber Co., 177 Ga. 779, 171 S.E. 374 (1933) (decided under former Civil Code 1910, §§ 1010 - 1087, 3162).

Liability for tort committed by surviving partner.

- When conversion is committed by a surviving partner, whose firm received goods for storage, the firm would not be liable for such tort by the surviving partner. Blanchard v. Farmers State Bank, 158 Ga. 780, 124 S.E. 695 (1924) (decided under former Civil Code 1910, § 3164).

Notice to Creditors

What creditors included.

- The word "creditors," as employed in Civil Code 1895, § 2634 (formerly § 14-8-91), was not limited to persons who are creditors at the time of the dissolution. A person who had previously sold goods and given credit to the firm during its continuance was within its meaning. Bush & Hattaway v. McCarty Co., 127 Ga. 308, 56 S.E. 430, 9 Ann. Cas. 240 (1907) (decided under former Civil Code 1895, § 2634); Mims v. Brook & Co., 3 Ga. App. 247, 59 S.E. 711 (1907) (decided under former Civil Code 1895, § 2634).

Sufficient notice.

- Under Code 1882, § 1895 (formerly § 14-8-91) the notice which a creditor has to have is actual. The world would be bound by such notice as a publication in a public gazette. Ewing & Gaines v. Trippe, 73 Ga. 776 (1884) (decided under former Code 1882, § 1895).

Fair and reasonable publication in a public gazette circulated in the locality in which the business of the partnership has been conducted was generally sufficient; and any means of fairly publishing the fact of such dissolution as widely as possible, in order to put the public on its guard, were proper to be considered on the question of such notice. Askew v. Silman, 95 Ga. 678, 22 S.E. 573 (1895) (decided under former Code 1882, § 1895); Bush & Hattaway v. McCarty Co., 127 Ga. 308, 56 S.E. 430, 9 Ann. Cas. 240 (1907) (decided under former Civil Code 1895, § 2634).

Notice may be given to agent of creditor. Franklin Buggy Co. v. Carter, 21 Ga. App. 576, 94 S.E. 820 (1918) (decided under former Civil Code 1910, § 3163); Bennett v. Watson, 31 Ga. App. 367, 120 S.E. 802 (1923) (decided under former Civil Code 1910, § 3163).

Notice to customer who is not creditor.

- Personal notice is not necessary as to one who has never been a creditor but has only purchased goods from the firm. Askew v. Silman, 95 Ga. 678, 22 S.E. 573 (1895) (decided under former Code 1882, § 1895); Skeffington v. Daniel, 18 Ga. App. 262, 89 S.E. 458 (1916) (decided under former Civil Code 1910, § 3163).

Predecessor statute not applicable to creditors of individual partner.

- Former Civil Code 1910, § 3163 (formerly § 14-8-91) applied only to the creditors of the partnership, and not to the creditors of an individual partner. First Nat'l Bank v. Wade, 25 Ga. App. 132, 102 S.E. 836 (1920) (decided under former Civil Code 1910, § 3163).

Death of partner.

- When one of partners dies, it was not necessary that notice be given to third persons or to the world of dissolution of the partnership. The death of a partner supplied such notice. Hammond v. Otwell, 170 Ga. 832, 154 S.E. 357 (1930) (decided under former Civil Code 1910, § 3164); Russell v. Strain, 69 Ga. App. 654, 26 S.E.2d 460 (1943) (decided under former Code 1933, § 75-108).

Retiring partner not liable for future transactions.

- When a sales agency contract is entered into between a company and partners, under which the company furnishes merchandise to the partners to be sold and proceeds remitted to it, but the partnership is thereafter dissolved by withdrawal of one of the partners with notice to the company, the retiring partner is not liable for the proceeds of the sale of any merchandise thereafter furnished by the company to the other partner, but occupies the position of a surety for the proceeds of all merchandise which had been furnished to the partners prior to the dissolution but which had not been sold by them and the proceeds remitted. Terrell Elec. Co. v. Miller, 66 Ga. App. 727, 19 S.E.2d 208 (1942) (decided under former Code 1933, § 75-108).

Partner liable for partnership debts when no notice given of his leaving.

- Plaintiff was still a copartner in the business and liable for its debts, after plaintiff sold out to plaintiff 's brother, but did not give other partners no notice, nor did plaintiff give creditors and depositors any notice of plaintiff's leaving the company. Nants v. Martin, 41 Ga. App. 453, 153 S.E. 440 (1930) (decided under former Civil Code 1910, § 3163).

Insufficient notice of dissolution.

- A mercantile partnership may sell its entire stock of goods and retire from active business and still preserve its partnership entity for purposes of liquidation; a partnership that did both, with a notice that the "store" had been "sold out," given by a partner to one of its creditors during the existence of the partnership as above indicated and before the creditor took a note executed in its name by another partner in renewal of a partnership debt, gave insufficient notice to the creditor of a dissolution of the partnership, even if the sale amounted to such a dissolution. Williams v. Madison County Bank, 33 Ga. App. 507, 126 S.E. 895 (1925) (decided under former Civil Code 1910, § 3163).

Effect of insufficient notice.

- The fact that a creditor may not have had sufficient notice of the dissolution of the partnership does not affect the actual right of one of the erstwhile members to contract on behalf of the partnership. It would merely estop the other partner from denying the authority of the person who undertook to bind the partner. Citizens Nat'l Bank v. Jennings, 35 Ga. App. 553, 134 S.E. 114 (1926) (decided under former Civil Code 1910, § 3164).

Partner may be relieved of liability by express notice of dissent.

- Even before dissolution of a partnership and notice to creditors, a partner might relieve oneself of liability for future transactions by "express notice of dissent to the person about to be contracted with," although otherwise, under former Civil Code 1910, § 3180 (formerly § 14-8-61), "all the partners are bound by the acts of any one, within the legitimate business of the partnership." McMillan v. Gilmour, 49 Ga. App. 400, 175 S.E. 672 (1934) (decided under former Civil Code 1910, § 3180).

Partner not executing renewal note is nevertheless bound thereon in absence of express notice to creditor of objection by that partner to the execution of the renewal note. Williams v. Madison County Bank, 33 Ga. App. 507, 126 S.E. 895 (1925) (decided under Civil Code 1910, § 3163).

RESEARCH REFERENCES

Am. Jur. 2d.

- 59A Am. Jur. 2d, Partnership, § 564 et seq.

C.J.S.

- 68 C.J.S., Partnership, § 431 et seq.

ALR.

- Right of solvent partner to close firm business upon bankruptcy or insolvency of copartner, 29 A.L.R. 45.

Creditor's failure to dissent to retiring partner's notice of noncontinuing liability as assent to his release, 52 A.L.R. 499.

Liability of former partners as such in respect of transactions subsequent to incorporation of their business, 89 A.L.R. 986.

Powers of liquidating partner with respect to incurring of obligations, 60 A.L.R.2d 826.

Syfert Injury Law Firm

2018 Georgia Code 14-8-35 | Car Wreck Lawyer