On March 8, 1999, Gary Martz and Herman Gaily entered into apartnership agreement (the Agreement) for the purpose of practicinglaw in Pennsylvania. A limited liability partnership called Martz& Gailey, LLP, was formed with each partner owning 50% interestin the partnership. Gary Martz’s wife, Holly Martz, was the officeadministrator of the firm. On May 19, 2008, Gary Martz died andHolly Martz became the executrix of Gary Martz’s estate. The firmcontinued past 2011 and Holly Martz filed a suit against Martz& Gailey, claiming that under Section 13.1 of the Agreement,Gary Martz’s death constituted a “liquidating event” because therewas only one partner left and therefore that the partnership shouldbe dissolved and liquidated and that half of the proceeds should goto Gary Martz’s estate.
Martz & Gailey filed a counterclaim asserting that underSections 12.1 and 12.2 of the Agreement, Gary Martz’s death was a“retirement event” and that the partnership would not be dissolved.Furthermore, Gary Martz’s estate was only entitled to “an amountequal to the Net Equity of the Retiring Partner’s interest as ofthe last day of the month preceding the month during which theRetiring Event occurs, less any partnership distributions to theRetiring Partner after such day.”
On January 5, 2012, the trial court granted Holly Martz partialjudgment on the pleadings, finding that the death of Gary Martzconstituted a “liquidating event.” Martz & Gailey appealed.
How would you rule on appeal?
The Agreement was created pursuant to the Pennsylvania UniformPartnership Act. Based on this information, would the existence orlack of existence of Section 13.1 affect whether or not apartnership would be dissolved because of Gary Martz’s death? (Whatis the default rule?)
