Legal Memorandum: Ademption of Partnership Property in CA

Issue: Under California law, is a bequest of partnership property considered to have been adeemed when the only asset of the partnership has been sold prior to the testator’s death if the proceeds of the sale are identifiable?

In the case of Estate of Peyton, 143 Cal. App. 2d 379 (1956), the testator gave his interest in certain New York property to his three sons from a previous marriage and the residue of the estate to his wife.  During his lifetime the property, that was operated as a de facto partnership, was sold and the testator received the proceeds representing his interest in the property, which proceeds remained in the estate upon his death.  The trial court determined that “the title to the property having passed and individual checks to the interested parties having been drawn and delivered, the real property in question was completely obliterated; and that the proceeds would pass to the widow [under the residuary clause] ‘in spite of’ the existence of any [alleged] partnership.”  143 Cal. App. 2d at 382. 

On appeal the sons argued that what the testator owned was an interest in a partnership and not real estate and that the partnership interest was personalty and consequently that interest never changed, but the partnership merely altered its assets.  The court rejected that argument:

Even under the theory that what the testator owned was a partnership interest in this land, and that he intended to bequeath that interest to the sons, the fact remains that neither he nor the partnership had any interest in the land at the time of his death, since the land had previously been sold and fully paid for.  […]

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