(Code 1981, §14-8-38, enacted by Ga. L. 1984, p. 1439, § 1; Ga. L. 1985, p. 1436, § 5; Ga. L. 1987, p. 1444, § 3; Ga. L. 1989, p. 927, § 2; Ga. L. 1994, p. 97, § 14.)
Law reviews.- For note on 1989 amendment of this Code section, see 6 Ga. St. U. L. Rev. 188 (1989).
COMMENT
Note to Uniform Partnership Act This section states the rights of the partners to compel liquidation or continuation of the business of the partnership after dissolution. Pursuant to subsection (a), subject to contrary agreement, when the dissolution has not been caused wrongfully any partner may compel liquidation (except that an expelled partner has only the right to be paid the amount due him and to be protected from partnership liabilities). Pursuant to subsection (b), subject to contrary agreement, in the event of a wrongful dissolution, all of the partners who did not wrongfully cause dissolution may unanimously agree to continue the partnership, in which event a partner who caused the dissolution is entitled only to receive the value of his interest less damages and excluding goodwill, and to be protected from partnership liabilities. The continuation rights granted by this section and by partnership agreements authorized by this section are the antidote to the ability of any partner to dissolve the partnership entity by express will at any time pursuant to § 14-8-31(2).
Prior Georgia Law There was no comparable provision or case law differentiating between situations in which partners may continue or compel liquidation of the partnership business, or providing for the rights of the partners in these situations.
Official UPA This section has been extensively changed from the official version. The following is a summary of the important changes:
(1) The lead-ins to subsections (a) and (b) have been changed to clarify that the applicability of each subsection depends not only on whether dissolution was "in contravention of the partnership agreement" but on whether dissolution was caused in an otherwise wrongful manner (for example, by a court decree based on partner misconduct pursuant to subsections 14-8-32(1)(c) and (d)).
(2) The rights and duties of the partners have been made more flexible in several respects. First, subsection (b), as well as subsection (a), has been made subject to contrary agreement of the partners, and subsections (a) and (b) validate continuation agreements made at the time of the transaction as well as continuation provisions in the partnership agreement. Second, the Georgia version does not include absolute requirements concerning the form of payment to expelled or wrongfully dissolving partners or protection of such partners from liabilities. Finally, language has been added to subparagraph (b)(1)(B) permitting the partners to agree to rights and remedies in addition to those provided for in the section.
(3) Subsection (a) has been revised to clarify that the right to application of partnership property is available to "the legal representative of the estate of a deceased partner." This is consistent with prior Georgia case law (see Murphy v. Murphy, 214 Ga. 602, 106 S.E.2d 280 (1958)) and with the Nebraska version of § 38, Neb. Rev. Stat. § 67-338 (1981).
(4) Paragraph (b)(2) has been revised to clarify that satisfaction of the claims of the departing partner is not a precondition to the right of the remaining partners to continue the partnership.
(5) Paragraph (b)(2) deletes the limitation on the duration of continuation to "the agreed term for the partnership." Thus, the non-"wrongful" partners may continue the partnership business upon expiration of an agreed term or termination of an agreed undertaking (see § 14-8-23) and the wrongful partner cannot compel liquidation at this time.
Cross-References Continuation of partnership after expiration of term or completion of undertaking: § 14-8-23. Causes of dissolution: § 14-8-31. Grounds for dissolution by decree of court: § 14-8-32. Right to wind up partnership affairs: § 14-8-37. Settlement of partnership affairs after dissolution: § 14-8-40. Rights of pre-dissolution creditors when business continued after dissolution: § 14-8-41. Rights of retiring partners and estates of deceased partners when business is continued after dissolution: § 14-8-42.
JUDICIAL DECISIONS
Liability for wrongful dissolution.
- In the case of wrongful dissolution of a partnership, a partner who did not wrongfully cause the dissolution is entitled not only to payment for net interest in the partnership (which would be calculated pursuant to an accounting), but also damages for wrongful dissolution. Damages for wrongfully excluding a partner from a partnership business opportunity should include compensation to the ousted partner for that partner's share of the prospective business opportunity. Arford v. Blalock, 199 Ga. App. 434, 405 S.E.2d 698, cert. denied, 199 Ga. App. 906, 405 S.E.2d 698 (1991), aff'd sub nom., Wilensky v. Blalock, 262 Ga. 95, 414 S.E.2d 1 (1992), overruled on other grounds Jordan v. Moses, 291 Ga. 39, 727 S.E.2d 460 (2012).
One partner's exercise of the right to terminate the partnership, if done in bad faith for the purpose of appropriating to that partner's benefit the prosperity of the partnership, would be a violation of the partnership agreement and would constitute wrongful dissolution of the partnership. Wilensky v. Blalock, 262 Ga. 95, 414 S.E.2d 1 (1992).
Court of appeals erred in granting an attorney's motion for summary judgment in its action to dissolve a partnership because it cited disapproved language that the tort of wrongful dissolution of a partnership required the attempt to appropriate the "new prosperity" of the partnership; the gravamen of a wrongful dissolution claim is a partner's attempt to appropriate, through the dissolution, the assets or business of the partnership, which may include prospective business, without adequate compensation to the remaining partners. Jordan v. Moses, 291 Ga. 39, 727 S.E.2d 460 (2012).
Dissolution of deceased partner's interest.
- Legal representative of deceased partner was entitled to liquidate partnership assets upon dissolution and Court of Appeals erred in holding that surviving partner did not owe fiduciary duty to the representative during winding up of partnership business. Chaney v. Burdett, 274 Ga. 805, 560 S.E.2d 21 (2002).
Lost profits properly awarded.
- Evidence that an appellant breached an agreement with the appellee; was unjustly enriched by keeping the profits of the parties' business during the months the appellee was entitled to operate it; and committed civil conspiracy when, in concert with the parties' lessor, prevented the appellee from operating the business, supported an award of lost profit damages to the appellee. Asgharneya v. Hadavi, 298 Ga. App. 693, 680 S.E.2d 866 (2009), overruled on other grounds, Jordan v. Moses, 291 Ga. 39, 727 S.E.2d 460 (2012).
Plaintiffs failed to present evidence of damages.
- The trial court properly granted the defendant's motion for directed verdict because the plaintiffs failed to present any evidence from which the jury could determine the remaining assets in the partnership in order to assess damages. Nunley v. Nunley, 248 Ga. App. 208, 546 S.E.2d 330 (2001).
RESEARCH REFERENCES
Am. Jur. 2d.
- 59A Am. Jur. 2d, Partnership, §§ 507 et seq., 520 et seq., 750 et seq.
C.J.S.- 68 C.J.S., Partnership, §§ 164, 436 et seq., 545, 547.
ALR.- Accountability for good will on dissolution of partnership, 65 A.L.R.2d 521.
Construction and application of expulsion provision in medical partnership agreement, 87 A.L.R.3d 328.