Fuller v. Brough
1966 Colo. LEXIS 700, 411 P.2d 18, 159 Colo. 147 (1966)
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Rule of Law:
A partner who provides written notice to terminate a partnership at will is considered the voluntarily withdrawing partner and is bound by an applicable non-competition clause. The partner is estopped from revoking their notice of withdrawal after the other partner has materially changed their position in reliance on it by initiating legal action.
Facts:
- On December 1, 1958, Joseph Brough and Quintus Fuller, both certified public accountants, entered into a partnership agreement to practice public accounting in Greeley, Colorado.
- The agreement, drafted by the partners, stipulated that either partner could withdraw at any time by providing three months' written notice.
- The agreement contained a non-competition clause prohibiting a withdrawn partner from practicing accounting within 45 miles of Greeley for five years.
- As compensation, the agreement entitled the withdrawing partner to their capital balance and 10% of the firm's cash receipts for five years following withdrawal.
- In early 1964, Brough purchased a farm without Fuller's consent, which Fuller later cited as a breach of the agreement.
- On August 21, 1964, Fuller delivered a written notice to Brough stating his intent to terminate the partnership, alleging Brough had violated the agreement by not devoting his full time to the business.
- On September 4, 1964, Fuller delivered a second notice informing Brough of his intention to move his office to another location in Greeley.
Procedural Posture:
- On September 24, 1964, Brough filed a complaint against Fuller in the trial court, seeking an injunction to enforce the non-competition agreement.
- Fuller filed an answer and counterclaim, alleging Brough was the voluntarily retiring partner and seeking to enjoin Brough instead.
- After a trial, the court found in favor of Brough, determining Fuller was the voluntarily withdrawing partner.
- The trial court entered a judgment on November 18, 1964, declaring the partnership terminated as of November 21, 1964, and enjoining Fuller from practicing accounting in the area for five years.
- On November 20, 1964, Fuller attempted to serve notice on Brough withdrawing his initial notice of termination.
- Fuller filed a motion for a new trial, which the trial court denied after striking his attempted withdrawal of notice.
- Fuller appealed the trial court's judgment to the Colorado Supreme Court.
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Issue:
Is a partner who initiates the dissolution of a partnership by giving written notice considered the 'withdrawing partner' subject to a non-competition clause, even if they claim the other partner's alleged misconduct forced their withdrawal?
Opinions:
Majority - Mr. Justice McWilliams
Yes. A partner who gives notice to withdraw from a partnership at will is the voluntarily withdrawing partner and is bound by the agreement's non-competition clause. The partner's claim of being forced out by the other partner's misconduct is negated by a trial court's factual finding that no such misconduct occurred. The court's reasoning was that the trial court's finding that Brough did not violate the partnership agreement was a finding of fact supported by the record and could not be disturbed on appeal. The evidence showed only 'trifling causes or temporary grievances,' which are insufficient grounds for a court to dissolve a partnership. Therefore, Fuller's argument that his withdrawal was 'involuntary' fails. The partnership agreement was terminable at will, and it clearly bound the withdrawing partner to the non-competition clause, a type of provision previously upheld by the court. Furthermore, Fuller was estopped from revoking his notice of withdrawal because Brough had already relied on it by retaining counsel and filing suit to enforce the agreement. Fuller’s attempt to withdraw his notice only after receiving an adverse judgment was too late.
Analysis:
This decision solidifies the enforceability of non-competition clauses within professional partnership agreements, treating them as a bargained-for exchange. It underscores the high deference appellate courts give to trial court findings of fact, particularly regarding claims of partner misconduct. The case is significant for its application of equitable estoppel in a partnership dissolution context, establishing that initiating litigation constitutes sufficient detrimental reliance to prevent a party from revoking a prior notice. This precedent provides certainty for partners acting on a notice of withdrawal and prevents the withdrawing party from using litigation as a risk-free test of their legal position.
