Partnership Problems: After the untimely death of his partner Anthony Autumn, Sc
ID: 415404 • Letter: P
Question
Partnership Problems:
After the untimely death of his partner Anthony Autumn, Scott Schroder continued his San Francisco agency under the name of Scott Schroder. Several years later, one Sarah Schroder visited his office claiming to be his daughter. Sarah demanded that Scott make her a partner in the agency, but Scott refused. Scott told Sarah, "I'll never take on another partner as long as I can walk. But if you want to work for me, I'll buy you a yellow trench coat and all pens you want and pay you $20 a week plus expenses and 20% of the profits.
Scott Schroder continued to carry on the agency's business in the name of Scott Schroder. Nevertheless, when occasional bills arrived in the name of Schroder & Schroder, he was as likely to pay those bills as any others. Sarah never complained. Maybe some day he'll really treat me like a partner after all, she mused.
Ten years later, Scott is often absent from work and when he is there doesn't do any work. Business fell off quickly and creditors began to call frequently. After Scott had hounded Sarah for weeks to pay the creditors, Sarah began paying the creditors with her personal funds. One day when Scott was particular difficult, Sarah finally left. One her way through the door, she yelled, "You were never a father to me, you faked the agency books for years, and you never did any work. I know you've siphoned off thousands of dollars, and I'll get my share of it. Send my lawyer a certified check for my share of this business or I'll see your in court."
1. Is Sarah entitled to any share/funds of the agency business? Please explain why.
2. The agency business has no funds, and Scott has disappeared. Under what circumstances do you think creditors should be able to collect from Sarah? Please explain why, thank you.
Explanation / Answer
Question1)
Sarah Schroder, as mentioned, is a daughter of Scoot Schroder, and she has lawful right to be the part of her father’s business upon his death, before that if there is no contract between Scott and Sarah, in that case she won’t be able to be the partner in the firm. According to the law, once the parents are deceased without any legal will, their children, no matter son or a daughter, have full right to get the parent’s property, money and other business in equal amount.
But in this case since Scott was alive and was fully functional towards his firm he decided to not make Sarah his partner and Sarah cannot do anything about the same.
Question2)
Once the creditor started asking for their money and Scott disappeared, Sarah started making the payments from her own funds, although Sarah doesn’t have to pay money from her own funds as the funds she had is not a share of company business. Since Sarah was not legal partner of the firm, creditor has no right to make Sarah pay for the business frauds.
In such cases, creditors will be only paid if Scoot has any estate or assets, the court will first sell the property and assets under the name of Scott and pay the creditors. In case Scott had no property or assets then the creditors will not get paid and they have no legal right to make Sarah pay for the credit.