Opinion ID: 2284361
Heading Depth: 4
Heading Rank: 1

Heading: Unfinished Business Under an Agreement to Wind Up Contemporaneously With Dissolution or an Election to Waive Liquidation

Text: Absent a contrary agreement, the general rule is that [a]ll of the partners of the dissolved firm ... are ... entitled to share in fees for pre-dissolution work in process paid after dissolution to the dissolved partnership or to withdrawing partners. A. BROMBERG & L. RIBSTEIN, supra § 7.08(e), at 7:81-82 (citations omitted). Such fees, however, may lose their status as assets subject to distribution by an agreement of the partners to divide them upon dissolution when one or more partners wants to continue the business. See, e.g., Hudson v. Kemper, 153 A.2d 316, 318 (D.C.1959). Winding up can be contemporaneous with dissolution when the partners expressly or impliedly agree to transfer their shares of the business to the continuing partner. Gibson v. Deuth, 270 N.W.2d 632, 635 (Iowa 1978), citing Wolf v. Murrane, 199 N.W.2d 90 (Iowa 1972). The transfer is for a sum which may include the out-going partner's percentage of profits from unfinished business earned before the date of dissolution, id., at 635, and can take the form of an agreed-upon accounting concurrent with dissolution. The sole case from the District of Columbia cited by appellants is in harmony with this approach. In Hudson v. Kemper, supra , this court recognized: Generally, it is the rule that a partner, who, after dissolution of the firm, makes profits from continued operations shall be accountable to his coadventurer.... Here, we have, however, an agreement in which a settlement or balance was struck disposing of the partnership assets, such as the trade name, money in the bank, office furniture, catalogs, etc.... Apparently the parties intended, with the dissolution agreement, a complete severance of their relationship, for appellant had knowledge of the [disputed] contingent building contracts and made no provision for them. 153 A.2d at 318. Accord, Griffeth, supra, 61 Cal.App.2d at 606, 143 P.2d at 525 ([i]n the instant action there was ... a dissolution proved and an accounting agreed upon). Besides assigning his rights in partnership property to the continuing partners for an agreed-upon compensation, a partner may consent, affirmatively or by acquiescence, to their continuation of the business without formal assignment. D.C. Code §§ 41-140(a), (c), 41-141. In this case the Partnership Act entitles him to an election. He may receive, at his option, either the value of his interest at the date of dissolution (with interest) or the profits attributable to the use of his right in the property of the dissolved partnership as an ordinary creditor of the partnership, subordinated to other creditors. Id. § 41-141. But the continuation of the business cases just discussed do not deal with the case where one partner insists on a winding up and liquidation of the partnership on dissolution, and no settlement of accounts including unfinished business takes place. When a partnership is dissolved without violating the partnership agreement, each partner has an absolute right to demand liquidation and distribution of surplus, unless otherwise agreed. See D.C.Code § 41-137(a). That one or more partners wants to continue the business does not affect this right. Absent wrongful dissolution, or expulsion of a partner under a provision in the partnership agreement, see note 22, supra, if one partner elects to liquidate upon dissolution, the others cannot continue the partnership business. A. BROMBERG & L. RIBSTEIN, supra, § 7.13, at 7:118 (business may be continued when all of the partners elect to permit continuation rather than to exercise the liquidation right (emphasis added)). Accord, J. CRANE & A. BROMBERG, LAW OF PARTNERSHIP § 86(c) (1968) (non-continuing partner can elect to force a liquidation of business or permit it to continue and claim as creditor the value of his interest at dissolution). [23]