Story Case

Arnold Brown, David Lawson and Herbert Lang were partners in the publishing business. A disagreement arose among them, and the first two voted to discontinue the partnership, and also that Lang should not have any control in the affairs of the firm, while the property was being sold. Brown and Lawson, thereupon, took complete possession of the property, and refused to give Lang any rights or power. The latter, thereupon, brought suit in court for the possession of the firm property and for the personal right to dissolve the firm. What will the Court do with reference to the rights of the partners?

Ruling Court Case. Mcdonald Vs. Trojan Button Fastener Company, Volume 10 New York Supplements, Page 91

McDonald, Ham and Wright were engaged as partners under the firm name of the "Trojan Button Fastener Company." Notice of dissolution was given and before the partnership business was closed up, Ham and Wright, in conjunction with one Patterson and others, united in forming a corporation, styled the "Trojan Button Fastener Company, Incorporated," for continuing the business of the partnership, and Ham and Wright transferred all the firm property to the newly formed corporation.

All this was done without the knowledge or consent of McDonald. He, thereupon, filed this bill to enjoin the corporation from dealing with the partnership property and asked that it all be reconveyed to him for the purpose of settling up the partnership affairs.

Decision

After notice of dissolution, a transfer by two members of a firm, of all the firm property, to a corporation, organized by them for the purpose of continuing the business under a new arrangement, cannot affect the rights of the remaining partner who does not consent thereto; and he is, thereafter, entitled to the exclusive control of all the firm property, for the purpose of winding up the partnership affairs. It was, therefore, decreed that all the property be delivered to the complainant for the purpose prayed.

Ruling Law. Story Case Answer

Where partners have mutually agreed to dissolve the relation existing between them, in the absence of any agreement to the contrary, each partner has still the right to participate in the business of closing up the partnership affairs. One or more of the partners have no right to assume exclusive control of the assets and dispose of them as they choose, to the exclusion of the remaining partners. Since, in the Story Case, Brown and Lawson unlawfully usurped the right of Lang, the latter was justified in going into Court and demanding that the Court should give him possession and the right to bring the partnership to a close.