Zimmerman v. Harding - 227 U.S. 489 (1913)
U.S. Supreme Court
Zimmerman v. Harding, 227 U.S. 489 (1913)
Zimmerman v. Harding
Nos. 771, 894
Submitted January 10, 1913
Decided February 24, 1913
227 U.S. 489
A partnership formed to run a hotel for which a lease is obtained held, in the absence of any stipulation as to duration, to be for the term of the lease.
Where partnerships are regulated by statute, as in Porto Rico, the rights of one attempting to dissolve depend upon the statute, rather than on general law applicable elsewhere.
The right to dissolve under § 1607, Civil Code Porto Rico, is confined to partnerships the duration of which has not been fixed; under § 1609, a partnership for fixed duration can only be dissolved for sufficient cause shown to the court, and one attempting to dissolve before the fixed termination and to exclude the other from participation must account to the latter for his share of the profits until the court decrees a dissolution in a suit brought to dissolve.
Partnership property continues to be such after, as well as before, dissolution.
Where one party attempts to illegally dissolve a partnership without suit and subsequently the other brings a suit for dissolution in accordance with the statute, the former must account for all profits until the final decree of dissolution.
The doctrine of election is applicable as between inconsistent remedies, but does not apply to a partner wrongfully excluded from participation. He does not lose his right to an accounting because he first starts an action at law which he subsequently dismisses.
There may be a recovery at law for damages resulting from a breach of the partnership agreement as well as an action for accounting in equity for the same breach, and a partner wrongfully excluded from management and profits need not wait for the end of the period, but may show, in an action at law, his probable profits.
One who wrongfully excludes the other partner from management of the partnership affairs is not entitled to a salary for managing them during such period of exclusion.
This Court can only review an improper allowance of salary to a partner where an exception has been filed to such allowance.
Where the case has been tried in an irregular manner and items are allowed in the final decree which do not appear in the auditor's or master's report, this Court cannot attempt to correct error assigned here, and will presume that the decree, so far as it stands upon questions of fact, is supported by evidence not objected to.
The case, in substance, is this:
The appellee, Harding, undertook to obtain a lease from the owner of a hotel property situated in a suburb of San Juan, Porto Rico, and an option of purchase. The parties agreed upon the rental, term of the lease, and upon an option of purchase during the term of the lease, but the owners required Harding to associate himself with another person, as co-lessee, satisfactory to them. After some negotiations, Harding arranged with the appellant, Mrs. Zimmerman, to join him in the lease and option, and to form a partnership to operate the hotel. Each agreed to contribute one-half of an agreed capital, their personal services, and to share in the profits and losses equally. The agreement of partnership was never reduced to writing, and there was no express stipulation as to its duration.
Under date of February 1, 1911, the owners of the hotel property executed a lease to the partnership for the term of two years, with right of renewal for another term of two years at an advanced rental. This lease included an option of purchase during the term at a price named. Thereupon the partnership took possession of the property and its operation as a hotel. Harding undertook the office side of affairs, and Mrs. Zimmerman the other departments. The business seems to have run along smoothly and with profit until about August 9, 1911, when Mrs. Zimmerman, who was in sole charge by reason of the temporary absence of Harding upon a vacation in the United States, assumed of her own motion to dissolve the partnership. To this end, she notified Harding by letter that she had dissolved the relation, and published a card in the local papers that the partnership had been
dissolved, and that she would thenceforth conduct the business for her own benefit. From that moment, she assumed the entire ownership and possession of the partnership business and property. Harding was excluded from all possession, control, or voice, and all benefits which had accrued, she claiming that he had drawn more than his share upon an accounting.
When Harding returned to San Juan, he at once brought an action at law against Mrs. Zimmerman to recover damages for the breach of the partnership contract. This suit was removed by Mrs. Zimmerman to the District Court of the United States for the District of Porto Rico. Thereupon Harding obtained leave to dismiss his action at law, without prejudice, and filed this bill. Its object was to obtain a decree of dissolution and an accounting of the partnership affairs. The appointment of a receiver to manage the business pending the litigation was at once sought by Harding under the averments of the bill. This was resisted, and denied by the court. Upon the coming in of her answer, an auditor was appointed to report upon the partnership accounts. Mrs. Zimmerman remained in full control of the hotel business down to the date of final decree, May 18, 1912, by which the partnership was dissolved. At that date, a special master was put in charge of the business to conduct it until a sale of the assets should be had and distribution made. The partnership property, including the unexpired term of the lease, was sold, and the auditor's and master's reports confirmed. The final result was that the share of Harding in the proceeds of the business, including profits realized to date of sale, was fixed at $3,008.02, and that of Mrs. Zimmerman, $4,878.22. From this decree both parties have appealed.