Termination of Partnership Flashcards
Adams v. Jarvis (Wis. 1964) [decision avoids dissolution of p-ship]
Facts: Drs in p-ship, have p-ship agmt that says p/n that leaves can get (1) any balance standing to his credit on books, (2) his proportion of p-ship profits of FY at end of FY, (3) amount of his capital account. ALSO says he can’t get accounts receivable
Issue: Does p-ship agmt or statute UPA § 38(1) control?
Hold: P-Ship Agmt controls! Literally says “unless otherwise agreed” in statute. (1⁄3 = interest in p-ship) * (5/12 mo) * (1961 profits) Rule: (1) When parties bargained for different way to divide the accounts, P-ship agmt controls; (2) remaining p/ns have fiduciary duty to conduct biz in GF
Reasoning: If there is a gap in the K, fill in w fiduciary dutyàhere remaining p/ns fiduciary includes GF effort to liquidate accounts receivable during this YR (so that $ goes back into assets that w/drawing p/n can collect from at end of FY)
Efficient? Yes, lets p/ns make agmts, but fills in gaps in K w fiduciary duties.
Page v. Page (Cal. 1961) [Initiates dissolution]
Facts: 2 bros in linen biz, older bro makes loan to biz when its failing, then it gets profitable, then he kicks younger bro out of p-ship Issue: What was length of p-ship? (younger says its until we profit, but older says its until one p/n decides to leave)
Hold: (Older) When one decides to leave. “Mere hope” to make profit not a K term.
Rule: P-ship can be dissolved at ANY time but cannot dissolve to hurt another p/n [needs to be in GF for duty of loyalty] Reasoning: App Ct reversed trial Ct bc they won’t read in term, treat it as if it is at will but WILL imply fiduciary duties.
Note: Older wants this bc of way $$ distributed (after 3P creditors, he gets his loan $ back).
UPA § 24. Extent of Property Rights of a Partner
The property rights of a partner are (1) his rights in specific partnership property, (2) his interest in the partnership, and (3) his right to participate in the management.
UPA § 25. Nature of a Partner’s Right in Specific Partnership Property
(1) A partner is co-owner with his partners of specific partnership property holding as a tenant in partnership.
(2) The incidents of this tenancy are such that:
(a) A partner, subject to the provisions of this act and to any agreement between the partners, has an equal right with his partners to possess specific partnership property for partnership purposes; but he has no right to possess such property for any other purpose without the consent of his partners.
(b) A partner’s right in specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property.
(c) A partner’s right in specific partnership property is not
subject to attachment or execution, except on a claim against the partnership. When partnership property is attached for a partnership debt the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws.
(d) On the death of a partner his right in specific partnership property vests in the surviving partner or partners, except where the deceased was the last surviving partner, when his right in such property vests in his legal representative. Such surviving partner or partners, or the legal representative of the last surviving partner, has no right to possess the partnership property for any but a partnership purpose.
(e) A partner’s right in specific partnership property is not subject to dower, curtesy, or allowances to widows, heirs, or next of kin.
UPA § 26. Nature of Partner’s Interest in the Partnership
A partner’s interest in the partnership is his share of the profits and surplus, and the same is personal property.
UPA § 27. Assignment of Partner’s Interest
(1) A conveyance by a partner of his interest in the partnership does not of itself dissolve the partnership, nor, as against the other
partners in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the assignee to receive in accordance with his contract the profits to which the assigning partner would otherwise be entitled.
(2) In case of a dissolution of the partnership, the assignee is entitled to receive his assignor’s interest and may require an account from the date only of the last account agreed to by all the partners.
UPA § 29. Dissolution Defined
The dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business.
UPA § 30. Partnership Not Terminated by Dissolution
On dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed.
UPA § 31. Causes of Dissolution
Dissolution is caused:
(1) Without violation of the agreement between the partners,
(a) By the termination of the definite term or particular undertaking specified in the agreement,
(b) By the express will of any partner when no definite term or particular undertaking is specified,
(c) By the express will of all the partners who have not assigned their interests or suffered them to be charged for their separate debts, either before or after the termination of any specified term or particular undertaking.
(d) By the expulsion of any partner from the business bona fide in accordance with such a power conferred by the agreement between the partners;
(2) In contravention of the agreement between the partners, where the circumstances do not permit a dissolution under any other provision of this section, by the express will of any partner at any time;
(3) By any event which makes it unlawful for the business of the partnership to be carried on or for the members to carry it on in partnership;
(4) By the death of any partner;
(5) By the bankruptcy of any partner or the partnership; (6) By decree of court under section 32.
UPA § 36. Effect of Dissolution on Partner’s Existing Liability
(1) The dissolution of the partnership does not of itself discharge the existing liability of any partner.
(2) A partner is discharged from any existing liability upon dissolution of the partnership by an agreement to that effect between himself, the partnership creditor and the person or partnership continuing the business; and such agreement may be inferred from the course of dealing between the creditor having knowledge of the dissolution and the person or partnership continuing the business.
(3) Where a person agrees to assume the existing obligations of a dissolved partnership, the partners whose obligations have been assumed shall be discharged from any liability to any creditor of the partnership who, knowing of the agreement, consents to a material alteration in the nature or time of payment of such obligations.
(4) The individual property of a deceased partner shall be liable for all obligations of the partnership incurred while he was a partner but
subject to the prior payment of his separate debts.
UPA § 37. Right to Wind Up
Unless otherwise agreed the partners who have nor wrongfully dissolved the partnership or the legal representative of the last
surviving partner, not bankrupt, has the right to wind up the partnership affairs; provided, however, that any partner, his legal representative or
his assignee, upon cause shown, may obtain winding up by the court.
UPA § 38. Rights of Partners to Application of Partnership Property
(1) When dissolution is caused in any way, except in contravention of the partnership agreement, each partner, as against his co-partners and all persons claiming through them in respect of their interests in the partnership, unless otherwise agreed, may have the partnership property applied to discharge its liabilities, and the surplus applied to pay in
cash the net amount owing to the respective partners. But if dissolution is caused by expulsion of a partner, bona fide under the partnership agreement and if the expelled partner is discharged from all partnership liabilities, either by payment or agreement under section 36(2), he shall receive in cash only the net amount due him from the partnership.
(2) When dissolution is caused in contravention of the partnership agreement the rights of the partners shall be as follows:
(a) Each partner who has not caused dissolution wrongfully shall have,
I. All the rights specified in paragraph (1) of this section, and
II. The right, as against each partner who has caused the dissolution wrongfully, to damages for breach of the agreement.
(b) The partners who have not caused the dissolution wrongfully, if they all desire to continue the business in the same name, either by themselves or jointly with others, may do so, during the agreed term for the partnership and for that purpose may possess the partnership property, provided they secure the payment by bond approved by the court, or pay to any partner who has caused the dissolution wrongfully, the value of his interest in the partnership at the dissolution, less any damages
recoverable under clause (2a II) of this section, and in like manner indemnify him against all present or future partnership liabilities.
(c) A partner who has caused the dissolution wrongfully shall have:
I. If the business is not continued under the provisions of paragraph (2b) all the rights of a partner under paragraph (1), subject to clause (2a II), of this section,
II. If the business is continued under paragraph (2b) of this
section the right as against his co-partners and all claiming through them in respect of their interests in the partnership, to have the
value of his interest in the partnership, less any damages caused to
his co-partners by the dissolution, ascertained and paid to him in
cash, or the payment secured by bond approved by the court, and to be released from all existing liabilities of the partnership; but in ascertaining the value of the partner’s interest the value of the good-will of the business shall not be considered.
UPA § 40. Rules for Distribution
In settling accounts between the partners after dissolution, the following rules shall be observed, subject to any agreement to the contrary:
(a) The assets of the partnership are: I. The partnership property,
II. The contributions of the partners necessary for the payment of all the liabilities specified in clause (b) of this paragraph.
(b) The liabilities of the partnership shall rank in order of payment, as follows:
I. Those owing to creditors other than partners,
II. Those owing to partners other than for capital and profits, III. Those owing to partners in respect of capital,
IV. Those owing to partners in respect of profits.
(c) The assets shall be applied in the order of their declaration in clause (a) of this paragraph to the satisfaction of the liabilities.
(d) The partners shall contribute, as provided by section 18
(a) the amount necessary to satisfy the liabilities; but if any, but not all, of the partners are insolvent, or, not being subject to process, refuse to contribute, the other partners shall contribute their share of the liabilities, and, in the relative proportions in which they share the profits, the additional amount necessary to pay the liabilities.
(e) An assignee for the benefit of creditors or any person appointed by the court shall have the right to enforce the contributions specified in clause (d) of this paragraph.
(f) Any partner or his legal representative shall have the right to enforce the contributions specified in clause (d) of this paragraph, to the extent of the amount which he has paid in excess of his share of the liability.
(g) The individual property of a deceased partner shall be liable for the contributions specified in clause (d) of this paragraph.
(h) When partnership property and the individual properties of the partners are in possession of a court for distribution, partnership creditors shall have priority on partnership property and separate creditors on individual property, saving the rights of lien or secured creditors as heretofore.
(i) Where a partner has become bankrupt or his estate insolvent the claims against his separate property shall rank in the following order:
I. Those owing to separate creditors,
II. Those owing to partnership creditors,
III. Those owing to partners by way of contribution.
