Hunter v. Straube
273 Or. 720, 1975 Ore. LEXIS 565, 543 P.2d 278 (1975)
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Rule of Law:
A partner has the power to dissolve a partnership at any time, but not the right to do so in contravention of the partnership agreement. If a partner's withdrawal violates the agreement, the rights of the parties are governed by the specific terms of the agreement regarding withdrawal and continuation, not the default provisions of the Uniform Partnership Law.
Facts:
- Dr. Arthur F. Hunter, Dr. O. D. Haugen, and Dr. Kurt R. Straube were partners in a medical radiology practice called Lloyd Center X-Ray.
- The partners operated under a written partnership agreement.
- The agreement stipulated that the retirement or withdrawal of any partner would not dissolve the partnership as to the remaining partners.
- The agreement required any partner who wished to voluntarily resign to provide six months' written notice to the other partners.
- The agreement contained a specific formula for valuing and paying out a withdrawing partner's interest.
- The agreement also included a non-competition clause, which would cause a withdrawing partner to forfeit their payout if they practiced medicine within a 40-mile radius within three years of leaving.
Procedural Posture:
- Dr. Hunter and Dr. Haugen (plaintiffs) filed a suit in the Circuit Court of Multnomah County, a trial court, to dissolve their medical partnership with Dr. Straube (defendant).
- Dr. Straube filed a counterclaim, asserting his right to continue the partnership business and to settle with the plaintiffs as withdrawing partners according to the partnership agreement.
- The trial court found that the filing of the lawsuit did not cause a dissolution of the partnership.
- Based on its finding that no dissolution had occurred, the trial court dismissed both the plaintiffs' suit for dissolution and the defendant's counterclaims.
- The plaintiffs appealed the trial court's decision.
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Issue:
Does a partner's act of filing a lawsuit to dissolve a partnership entitle them to a judicial dissolution under the Uniform Partnership Law when the partnership agreement specifies the procedures and consequences for a partner's withdrawal?
Opinions:
Majority - McAllister, J.
No. The filing of a lawsuit does not entitle partners to a judicial dissolution under the default rules of the Uniform Partnership Law when their partnership agreement explicitly governs withdrawal. While the plaintiffs' filing of the suit constituted an exercise of their power to dissolve the partnership, it did not give them the right to do so in contravention of their agreement. The court distinguished between the power to dissolve, which any partner has, and the right to dissolve, which is governed by the contract. The Uniform Partnership Law's provisions are subject to any contrary agreement between the partners. Here, the agreement expressly provided for the continuation of the partnership and set forth specific procedures and consequences for withdrawal. Therefore, the plaintiffs' action is treated as a wrongful withdrawal, entitling the defendant to continue the business, settle accounts according to the agreement's terms, and seek damages for the plaintiffs' failure to provide the contractually required six months' notice.
Analysis:
This decision reinforces the principle of freedom of contract, establishing that a detailed partnership agreement supersedes the default statutory rules for dissolution. It solidifies the distinction between a partner's inherent power to dissolve and their contractual right to do so, clarifying that a wrongful dissolution triggers the penalties and procedures within the agreement, not a statutory winding up. This provides stability for partnerships, especially in professional fields, by ensuring that remaining partners can continue the business and enforce bargained-for terms like notice periods, valuation methods, and non-compete clauses against withdrawing partners who attempt to circumvent the agreement.
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