Story Case

Edward Crist and Richard Hanly were florists doing business as The Red Rose Florists, a firm name. In order to extend their plant, a contract for the purchase of land was made with Herbert Lang. Title was then taken in the name of the firm, The Red Rose Florists. Later, Crist and Hanly attempted to place a mortgage upon the land, but were not successful, because the man who would lend the money objected, on the ground that a conveyance was never made from Lang, since a partnership could not hold real estate. What should Crist and Hanly do?

Ruling Court Case. Gille Vs. Hunt, Volume 35 Minnesota Reports, Page 357; Same Case, Volume 29 Northwestern Reports, Page 2

On the 25th day of July, 1856, one Denman executed a mortgage on some property which he owned, to D. B. Dorman and Company, a partnership, composed of D. B. Dorman and Ovid Pinney. This mortgage was duly recorded on the day of the execution thereof. On the 7th day of October, 1856, Denman conveyed the premises to Peter Poncin who recorded his deed the following day. On the same day, D. B. Dorman executed to Poncin a deed of quitclaim and release of the premises. This, also, was recorded on the 8th day of October, 1856. On April 15, it was duly recorded that Dorman assigned the mortgage to his partner Ovid Pinney. The mortgage contained a power of sale, by virtue of which Pinney had the mortgage foreclosed and the land sold; at the sale he became purchaser thereof.

The plaintiff, Gille, claims title to the land by virtue of the conveyance to Poncin and the quitclaim deed from Dorman. The defendant claims title under the foreclosure and sale to Pinney. It was contended by the defendant, Hunt, that no title to the land ever passed to Dorman, because the conveyance was not made to him, but to the partnership, which, he claimed, was unable to hold title to property.

Decision

Although a partnership cannot hold title to real estate, if a conveyance is made to a partnership, and the name or names of one or all of the partners appear in the conveyance, then the title passes to those whose names appear. In this case, therefore, the title passed to D. B. Dorman. Consequently the claim of Gille is valid and the defendant received nothing by the foreclosure and sale. The Court said in part: "Where the style of a partnership is inserted as grantee, and it contains the name or names of one or more of the partners, there is no reason why the title should not vest the new partners so named; and the authorities are to the effect that it would. The legal title to the mortgage in question was then in Dorman. He was the only person to whom legal title could be made under the mortgage.

Therefore, judgment was given for the plaintiff.

Note: But when the firm name is fictitious, no name of a natural person appearing in it, then a conveyance to a partnership passes no title.

Ruling Law. Story Case Answer

We have just seen that a partnership is recognized as a legal entity for the purpose of holding personal property in the firm name. But it is not recognized as such, to the extent that it may hold real property in that manner. All real partnership property must be held by the partners individually.

A conveyance of land to a partnership in the firm name passes title to the members whose names appear in the firm name. If we suppose that the firm of Jones and Brown is a partnership composed of Jones, Brown, and Smith, a conveyance of land to the firm, Jones and Brown, passes title to Jones and Brown only. If a conveyance of land is made to a partnership in its firm name, when the name is only fictitious, no title whatsoever passes from the grantor. Thus, if Johnson should make a conveyance of land to the Busy Bee Grocery Company, a partnership composed of Jones and Brown, no title by the conveyance ever passes from Johnson.

The interest of each partner in partnership real property is like his interest in personal property, belonging to the firm; he has no title to any specific part of the land, but it is his right to share in the distribution of the property after the partnership is dissolved, and all other partnership obligations are met. In the Story Case, Crist and Hanly should demand from Lang a conveyance to themselves in their own names. This would be possible, because the contract to convey, made by Lang, was never executed.