## Facts

- A three-partner law partnership (Mylish, Mann, and Drucker) shared profits and losses equally.
- The partnership procured life insurance on each partner: one $10,000 policy (1923) and an additional $50,000 policy (1930), totaling $60,000 on each partner’s life.
- The partnership was the named beneficiary on the policies and paid all premiums with partnership funds as business expenses.
- A written partnership agreement continued the partnership term and granted surviving partners an option to purchase a deceased partner’s interest on stated terms.
- The policies had been pledged as collateral for partnership debt but were reconveyed to the partnership after the debt was paid off before Mann’s death.
- Alfred Mann died in June 1943, when the policies were unencumbered.
- Insurers paid the proceeds on Mann’s policies (about $60,077.70) by checks payable to the partnership and to the two surviving partners and Mann’s executor.
- The surviving partners exercised the option to purchase Mann’s partnership interest, but disputed how to treat the insurance in valuing the firm.
- The executor asserted the full death proceeds became a partnership asset at death and must be included in valuing the business for the buyout.
- The surviving partners asserted that only the policies’ cash surrender value at death was a partnership asset for valuation purposes.

## Issues

1. Whether life-insurance death proceeds payable to the partnership on a deceased partner’s life became a partnership asset at death that must be included in full when valuing the deceased partner’s interest under the buyout option.
2. Whether the partnership agreement should be construed to limit valuation to the policies’ cash surrender value rather than the full proceeds.

## Decision

- The Pennsylvania Supreme Court affirmed judgment for the executor.
- The Court held that the life-insurance proceeds became a partnership asset contemporaneously with Mann’s death.
- The Court required the proceeds to be included in full in determining the value of Mann’s partnership interest for purposes of the surviving partners’ option to purchase.
- The Court applied a contract-construction principle that interpretations producing unreasonable results should be avoided.

## Legal Principles

- When a partnership is the named beneficiary of life insurance on its partners and pays premiums from partnership funds as business expenses, the policies and resulting death proceeds are treated as partnership property.
- For valuation under a buyout option triggered by a partner’s death, the partnership’s assets are determined as they exist at death; an asset that matures at death (insurance proceeds) is included at its matured value, not merely at pre-death cash surrender value.
- Contracts should be construed to avoid unreasonable or unlawful results; a reading that permits survivors to retain the full benefit of partnership-owned insurance while valuing the deceased partner’s interest as if the proceeds did not exist is disfavored.

## Conclusion

The court concluded that partnership-owned life-insurance proceeds payable upon a partner’s death are partnership assets arising at death and must be fully counted in valuing the deceased partner’s interest when surviving partners exercise a contractual option to purchase that interest.


Block v. Mylish, 351 Pa. 611, 41 A.2d 731 (Pa. 1945)