Sharing of the Residual Profit between the Remaining Partner and the Heirs of the Deceased Partner

Facts

Engineers Otto Schubert and Ernst Schwarzenbach had been operating an engineering firm together since 1928 in the form of a general partnership. After Schubert's death in 1959, negotiations between Schwarzenbach and Schubert's heirs (widow and daughter) on Schwarzenbach taking over the business with assets and liabilities failed. Schwarzenbach then requested the liquidation of the general partnership, of which he registered himself as the sole liquidator in the commercial register. However, instead of proceeding with the liquidation in accordance with Art. 585 CO, Schwarzenbach in fact took over the entire business for his own account, having the ongoing mandates executed by his own engineering firm, taking over the employment contracts of the employees and the lease of the premises. Schubert's heirs then claimed from Schwarzenbach a share of the residual profit from the ongoing mandates at the time of death as well as compensation for the commercial value of the business.

Considerations

The Federal Tribunal considers that, in such a situation where the remaining partner takes over the business in fact instead of proceeding with the liquidation, the provisions on the continuation of business by the remaining partner (Art. 579 et seq. CO) apply by analogy. This means that the remaining partner must pay the heirs of the deceased partner half of the commercial value of the business at the time of death, and not just half of the liquidation value.

The Federal Tribunal rejects the defendant's argument that only the sale price that a third party…