CHAPTER 77

DISSOLUTION BY BANKRUPTCY AND COURT

DECREE

§ 630. Dissolution by bankruptcy. §§ 631-634. Dissolution by court decree.

§ 630. (Partnerships, Sec. 71.) Dissolution by
bankruptcy.

(Note: Bankruptcy dissolves the firm. The rights of creditors has been treated supra.)

§ § 631-634. (Partnerships, Sec. 72-75.) Dissolution by court decree upon application of partner against the other.

Case 630. New v. Wright, 44 Miss. 202.

Facts: Bill by a partner to dissolve a partnership formed for a stated term of five years, on account of misconduct of partner.

Point Involved: Will a court at the suit of one partner decree a dissolution of the firm where it is shown that the other partner is guilty of misconduct of a serious character appertaining to partnership affairs.

PEYTON, C. J.:

The remaining question for our decision is, did the Court err in overruling the motion for the appointment of a receiver? 'It must be admitted,' said the master of the rolls in Madgwith v. Wimble, 6 Beavan, 495, 'that when an application is made for a receiver in partnership cases, the Court is always placed in a position of very great difficulty. On the one hand, if it grants the motion, the effect of it is to put an end to the partnership, which one of the parties claims a right to have continued; and on the other hand, if it

refuses the motion, it leaves the defendant at liberty to go on with the partnership, at the risk and probably at the great loss and prejudice of the dissenting party. Between these difficulties, it is not very easy to select the course which is best to be taken, but the Court is under the necessity of adopting some mode of proceeding to protect, according to the best view it can take of the matter, the interests of both parties.'

"In order to justify the dissolution of a partnership, on the ground of misconduct, abuse, or ill-faith of one of the parties, it is not sufficient to show that there is a temptation to such misconduct, abuse, or ill-faith, but there must be an unequivocal demonstration, by overt acts or gross departures from duty, that the danger is imminent, or the injury already accomplished: Story on Partnership, 464, § 288. Where a concern of any character or kind, covering a partnership, is broken up by controversial suits, and it is apparent that there can be no agreement between the parties in interest for its continuance, a receiver will be appointed: Williams v. Wilson, 4 Sandf. (N. Y.) Chan. 379; Edwards on Receivers, 330. And a dissolution of a partnership may be granted and a receiver appointed on account of the gross misconduct of one or more of the parties: 1 Story's Eq. 635, § 672a. To authorize the appointment of a receiver there must be some breach of the duty of a partner, or of the contract of partnership: Harding v. Glover, 18 Ves. 281."

Question 630: Why was dissolution and a receiver asked for in this case? When will misconduct of a partner justify dissolution notwithstanding the term has not expired?

(Note: A partnership may be dissolved for misconduct, for financial failure with no relief in sight, and for inability of the partners to work in reasonable harmony.)

(Note: The definition of a limited partnership is that of a partnership formed under a law compliance with which entitles some (or perhaps all) of the partners to have a limited liability, that is, a liability limited by the amount of their subscriptions, both as to the partnership and its creditors.)

§ 636. (Partnerships, Sec. 77.) The Limited Partner ship Act.

(Note: The Uniform Partnership Act has as yet not been widely adopted, but inasmuch as most states recognize the principle of the limited partnership, the statute will undoubtedly have a wider recognition.

The cases under the various limited partnership acts, construing local statutes, would hardly be worth consideration here. There are practically no cases under the Uniform Act.

See the act set out in the Appendix to this Subdivision just following the Uniform Partnership Act.

APPENDIX TO DIVISION F

1. UNIFORM PARTNERSHIP ACT

(In force in the following states: Alaska, Idaho, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, Pennsylvania, Tennessee, Utah, Virginia, Wisconsin, Wyoming.)

PART I.

PRELIMINARY PROVISIONS.

Sec. 1. (Name of Act.) This Act may be cited as Uniform Partnership Act.

Sec. 2. Definition of terms. In this Act "court" includes every court and judge having jurisdiction in the case.

"Business" includes every trade, occupation or profession.

"Person" includes individuals, partnerships, corporations, and other associations.

"Bankrupt" includes bankrupt under the Federal Bankruptcy Act or insolvent under any State insolvent Act.

"Conveyance" every assignment, lease, mortgage, or encumbrance. "Real property' includes land and any interest or estate in land. Sec. 3. "Knowledge" and "notice" of facts. (1) A person has "knowledge" of a fact with the meaning of this Act not only when he has actual knowledge thereof, but also when he has knowledge of such other facts as in the circumstances shows bad faith.

(2) A person has "notice" of a fact within the meaning of this Act when the person who claims the benefit of the notice.

(a) States the fact to such person, or

(b) Delivers through the mail, or by other means of communication, a written statement of the fact to such person or to a proper person at

his place of business or residence. Sec. 4. Rules of construction.

The rule that statutes in derogation of

the common law are to be strictly construed shall have no application to this Act.

(2) The law of estoppel shall apply under this Act. (3) The law of agency shall apply under this Act.

(4) This Act shall be so interpreted and construed as to effect its general purpose to make uniform the law of those states which enact it.

(5) This Act shall not be construed so as to impair the obligations of any contract existing when the Act goes into effect, nor to affect any action or proceedings begun or right accrued before this Act takes effect.

Sec. 5. Application of rules of law and equity. In any case not provided for in this Act the rules of law and equity, including the law merchant, shall govern.

PART II.

NATURE OF A PARTNERSHIP.

Sec. 6. Partnership defined. (1) A partnership is an association of two or more persons to carry on as co-owners a business for profit.

(2) But any association formed under any other statute of this State, or any statute adopted by authority, other than the authority of this State, is not a partnership under this Act, unless such association would have been a partnership in this State prior to the adoption of this Act; but this Act shall apply to limited partnership except in so far as the statutes relating to such partnership are inconsistent herewith.

Sec. 7. Determination of existence of partnership. In determining whether a partnership exists, these rules shall apply:

(1) Except as provided by section 16, persons who are not partners as to each other are not partners as to third persons.

(2) Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not of itself establish a partnership, whether such co-owners do or do not share any profits made by the use of the property.

(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived.

(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment:

(a) As a debt by installments or otherwise;

(b) As wages of an employee or rent to a landlord;

(c) As an annuity to a widow or representative of a deceased partner; (d) As interest on a loan, though the amount of payment vary with the profits of the business;

(e) As the consideration for the sale of the good-will of a business or other property by installments or otherwise.

Sec. 8. Partnership property. (1) All property originally brought into the partnership stock or subsequently acquired, by purchase or otherwise, on account of the partnership is partnership property.

(2) Unless the contrary intention appears, property acquired with partnership funds is partnership property.

name.

(3) Any estate in real property may be acquired in the partnership Title so acquired can be conveyed only in the partnership name. (4) A conveyance to a partnership in the partnership name, though without words of inheritance, passes the entire estate of the grantor unless a contrary intent appears.