Herslof v. Sharpe ( 1946 )

Dissolution-of-partnership action commenced October 15, 1945, by Earl Herslof and Charles Dossinger against Joseph Sharpe. From judgment in favor of plaintiffs, defendant appeals.

The plaintiffs seek a decree of dissolution of the partnership under the statutes and complain of breaches of the partnership agreement: That defendant at various times prior to October 5, 1945, wilfully failed and neglected to account for certain money received from sales made by him in the ordinary course of the business of the partnership; that he misappropriated the funds; that he was guilty of such conduct as tends to affect prejudicially the carrying on of the business of the said partnership. The defendant denied the failure to account, and alleged that he at all times complied with his obligations and duties under the articles of copartnership and that he has in no respect committed a breach of the partnership agreement. By way of counterclaims the defendant asked for an accounting and damages. A custodian of assets and property of the partnership was duly appointed.

The case was tried to the court and the court found as facts the existence of the partnership; that on April 25, 1945, plaintiffs elected to terminate the partnership as of October 18, 1945, according to provisions of the partnership agreement which, had that plan been pursued, would have entitled the defendant to fifty per cent of the estimated profits of the ensuing year in addition to his share of the partnership's assets; but that prior to the 5th of October the defendant neglected wilfully and wrongfully to account for moneys by him received; that upon becoming aware of the fraudulent conduct, plaintiffs served due notice upon the defendant terminating forthwith the partnership and summarily took possession of the property. The trial court further found —

"That by reason of the misappropriations of said partnership funds as herein specifically found and set forth, the defendant was and is guilty of such conduct as tends to affect prejudicially the carrying on of the business of the said partnership and was and is guilty of wilfully and persistently committing a breach of the said partnership agreement, by reason of which he has so conducted himself in matters relating to the partnership business that it was and is not reasonably practicable for the plaintiffs to carry on the business in partnership with the defendant.

"That on the 5th day of October, 1945, at the close of business on said day, the total assets of the said partnership amounted to $4,218.93, of which sum the net surplus or partners' capital account (as found by the audit of the books of said partnership by the custodian appointed by the court), amounted in all to the sum of $2,300.14."

As conclusions of law the trial court decided:

"1. That the plaintiffs are entitled to judgment and final decree:

"a. Wholly dissolving the partnership heretofore existing between the parties hereto as of the close of business on the 5th day of October, 1945; and

"b. Dismissing the counterclaims of the defendant against the plaintiffs upon their merits; and

"c. Discharging Chris Steinmetz, Esq., as custodian of the assets and property of the partnership business, and fully releasing and discharging him from any further liability or obligation as such.

"2. That upon payment by the plaintiffs to the defendant of the sum of $1,190.07 less the amount of misappropriations aggregating $35, and less one half (1/2) the sum of $300 heretofore allowed by the court as and for the custodian's fees and less the amount of costs and disbursements to be taxed herein as provided by law, the, plaintiffs are entitled to and shall have quiet and peaceful possession of all of the remaining assets and property of or in any way pertaining to the business heretofore owned and operated by the parties as copartners and known as Herslof Associated Opticians of Racine.

"3. That the plaintiffs shall have and recover their taxable costs and disbursements of this action." The dissolution of the partnership was rightfully accomplished by operation of law (sec. 123.27, Stats. 1945) on October 5, 1945. The steps taken before the discovery of wrongdoing by appellant had not at that time resulted in the effective dissolution of the relationship of the partners existing under their agreement. It is true that if the dissolution were to be controlled by the proceedings contemplated in April, the appellant would be entitled to more than he is allowed by the judgment. But he has placed himself outside the terms of the agreement. By his defaults he has violated the agreement and given cause for a dissolution of the partnership. He developed by his acts the circumstances under which the respondents could as a matter of right ask the court below for a decree of dissolution. The finding that Sharpe wilfully committed a breach of the partnership agreement and so conducted himself in matters relating to the partnership business that it was not reasonably practical to carry on with him as a partner certainly cannot be set aside under the evidence adduced. The learned trial judge said, with respect to the fifty per cent profits for the ensuing year, "There can be little doubt that the act of defendant in misappropriating the partnership assets entitled plaintiffs to terminate the partnership agreement at once. . . . Defendant's position that he is entitled to the additional fifty per cent of the profits notwithstanding his fraud is wholly untenable in a court of equity." The partnership was then, October 5, 1945, at an end. The only right then remaining in appellant was to be secured in the payment to him of the "value of his interest in the partnership" at the dissolution, less recoverable damages.

By the Court. — Judgment affirmed.