PART V. DISSOLUTION OF PARTNERSHIP. CHAPTER 10. DISSOLUTION BY LAPSE OF TIME, AGREEMENT, AND TRANSFER OF PARTNER'S INTEREST. Sec. 61. IN GENERAL. Dissolution of a partnership may be brought about by lapse of time; by mutual agreement; by transfer of a partner's interest; by death of partner; by bankruptcy; by judicial decree for various causes. Dissolution of a partnership may be brought about by the act of one of the partners without the consent of the others (in which case the one committing that act might become liable for breach of the partnership contract); by the act of all of them, as by agreement; and by causes beyond control of any of them. It may also be brought about in the Courts at the instance of one without the consent of the others. In this and the following chapters we will discuss the causes of dissolution and the consequences that follow dissolution. To get before us the various causes of dissolution let us tabulate them as follows: Dissolution may be caused: (1) By lapse of the time agreed upon. (2) By mutual agreement. (3) By transfer of partner's interest either by his own act or by operation of law. (4) By death of a partner. (5) By bankruptcy proceedings. (6) By judicial decree. 85 (a) Because of internal dissensions; (c) Because of partner's misconduct; Because of the financial failure of the en- In considering the power of one partner to dissolve the partnership, without the consent of the other members of the firm, we must remember that one may have the power to do a thing when he has no right to do it. A partner may always by his act dissolve the partnership, just as any contracting party may break his contract. If the dissolution so caused is wrongfully caused, he will of course be liable in damages. We will in this chapter consider dissolution by lapse of time, agreement and transfer of partner's interest, and in subsequent chapters, dissolution from other causes. Sec. 62. DISSOLUTION BY LAPSE OF TIME. When the term has passed or the object attained for which the partnership was founded the partnership comes to an end unless the parties agree to continue it. Partnerships are frequently formed for a certain period although, in numerous cases, the partnership runs indefinitely or perhaps periodically, that is by periods at the end of any one of which the partner has the right to withdraw by giving the notice provided for in the agreement. Partnerships that are stated to be for a certain period may continue afterwards by mutual agreement, and the partners may simply continue in business without any new definite agreement. A partnership at will may generally be dissolved at any time, but the dissolution must be in good faith and at a reasonable time.67 If the partnership is for the purpose of obtaining a specified result, there is no right to withdrawal before the result is accomplished except by mutual agreement.68 Sec. 63. DISSOLUTION BY MUTUAL AGREEMENT. Partners may mutually agree to abandon the enterprise and dissolve the partnership at any time. Of course the partners may mutually agree to dissolve the firm and thereupon wind it up. Whenever they can do this then no appeal to the Courts is necessary. We shall hereafter consider dissolution by judicial decree. That signifies, of course, that the partners could not mutually agree to dissolve, or, at least could not mutually agree as to their rights upon a dissolution, for if they could, no appeal to the Courts would be necessary. Sec. 64. DISSOLUTION BY TRANSFER OF PARTNER'S INTEREST. A transfer of a partner's interest by the partner or through the operation of the law while not necessarily a dissolution, generally so operates. A partner has no right to substitute another for himself without the co-partners' consent. If he sells out, the purchaser gets only a right to the partner's interest. He cannot buy himself into the firm. The other partners would be entitled to have the business wound up.69 67. Howell v. Harvey, 5 Ark. 270. 68. Brown v. Leach, 178 N. Y. S. 319. In this case the courts considered that Leach withheld his financial assistance in order to be able to go ahead and get the results for himself. The court held him accountable to Brown for a share of the profits. 69. Marquard v. N. Y. Mfg. Co., 17 Johns (N. Y.) 525. The partners may by agreement give transferability to shares. In such a case the partnership cannot be said to be dissolved in the sense that there is any right to a winding up or an accounting. If a creditor secures, through legal proceedings, a partner's interest, he secures no right to continue in the business with the other partners. He steps in the place of the other partner only to the extent of having a right to demand his share.70 Sec. 65. LIQUIDATION UPON DISSOLUTION FOR FOREGOING CAUSES. In the event of dissolution by reason of the foregoing causes it is the duty of the partners to liquidate, that is to settle with creditors and account among themselves. Each partner has the power to assist in the winding up of the firm, unless one partner has been given the sole power of liquidation. When the partnership dissolves it is the duty of the partners to pay the firm debts and to account among themselves. Each partner has apparent authority to take part in the winding up and to that end may collect, release and compromise. If the debts are more than the assets will pay, then the partners must share in the losses in the proportions in which they have agreed to share the profits or losses.71 This is a matter which concerns them alone. A creditor may hold any partner for the entire debt, as we have seen, irrespective of what his interest may be, whether large or small. If they have not agreed to pay losses in any specific 70. See Partnership Act, Sec. 28. 71. Whitcomb v. Converse, 119 Mass. 38, Partnership Act. Sec. 18a. proportion, they are liable in the same proportions in which they have agreed to share the profits.71a Sec. 66. THE ACCOUNTING BETWEEN THE PARTNERS, AND DISTRIBUTION OF ASSETS. Firm debts being paid, the partners must account among themselves and distribute the assets. A partner is entitled to a repayment of the capital paid in by him. The Partnership Act provides as follows: 72 "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, 71a. Id. 72. Sec. 40. |