Creel v. Lilly

Court of Appeals of Maryland · 1999 · Corporations

729 A.2d 385 (1999)

Updated August 22, 2026

CorporationsPartnershipsDissolutionWinding upDeceased partner's estateUPARUPApartnership dissolution

Facts

Joe's Racing was a general partnership formed by Joseph Creel, Arnold Lilly, and Roy Altizer under a written agreement stating that upon termination a full and accurate inventory would be prepared, the assets, liabilities, and income would be ascertained, and debts or profits distributed according to ownership percentages. When Joseph Creel died, the partnership was automatically dissolved, and because there was no express continuation provision and the estate did not consent to continuation, the surviving partners had to wind up the business. Lilly and Altizer conducted an inventory on August 31, 1995, hired an accountant to value the partnership, provided records to the estate, and then ceased doing business as Joe's Racing and began operating a new business, Good Ole Boys Racing, the next day. Anne Creel, as personal representative, argued that the surviving partners were required to liquidate all partnership assets and that the estate was also entitled to profits from the alleged continued use of partnership assets.

Issue

Does Maryland's Uniform Partnership Act permit the estate of a deceased partner to compel liquidation of all partnership assets when the partnership agreement does not expressly provide for continuation and the estate does not consent to continuation? If not, is the estate entitled to post-dissolution profits on the theory that the surviving partners continued the old partnership's business?

Rule

Maryland's UPA does not grant the estate of a deceased partner the right to demand liquidation of a partnership merely because the agreement lacks an express continuation clause and the estate does not consent to continuation. Where surviving partners in good faith wind up the business, provide an accurate accounting as of dissolution, and pay the estate its proportionate share, a forced sale of all partnership assets is generally unwarranted; and if the old partnership was properly wound up and a new successor partnership then began, the estate is not entitled to later profits.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Richmond, three partners run Blue Harbor Bicycles under a short written agreement. The agreement states that on termination, the partners must prepare a full inventory, determine assets and liabilities, and distribute the net balance by ownership percentage; it says nothing about selling inventory or fixtures. After one partner dies, the survivors complete the inventory, hire an accountant, and tender the estate the deceased partner's percentage share based on the accounting.

If the estate sues to compel an auction of all inventory and equipment solely because the agreement lacks an express continuation clause, what is the strongest argument for the surviving partners?

Explanation. The majority emphasized that courts must first look to the partnership agreement, with UPA supplying default rules only to the extent the agreement is silent. An agreement requiring inventory, ascertainment of assets and liabilities, and distribution by percentage may be read as an alternative winding-up procedure, even without any express liquidation language. Under that approach, the estate cannot force a sale merely because there is no continuation clause.