Drashner v. Sorenson

Supreme Court of South Dakota · 1954 · Corporations

63 N.W.2d 255 (1954)

Updated August 22, 2026

CorporationsPartnership dissolutionWrongful dissolutionValuation of partnership interestpartnershipUniform Partnership Actgoodwillvaluation

Facts

In January 1951, plaintiff and defendants became co-owners of a real estate, loan, and insurance business after defendants advanced $7,500 to buy an existing agency, with the arrangement contemplating continuation at least until that advance was repaid from gross earnings. A dispute arose over whether plaintiff could draw enough money from partnership earnings to support his family, with defendants asserting the agreement limited each partner to one-third of one-half of commissions on his own sales and required the rest of specified income to pay expenses and reimburse defendants' capital advances. There was evidence that plaintiff persisted in demands contrary to that arrangement, neglected business, spent business hours in bars, and threatened dissolution if not given more money. After dissolution, the trial court valued the partnership assets exclusive of goodwill at $4,498.90, less liabilities and unrepaid capital, leaving nothing payable to plaintiff.

Issue

Whether the evidence was sufficient to support the trial court's findings that plaintiff wrongfully caused dissolution of a partnership that was not at will, and that the value of the partnership property, excluding goodwill, was $4,498.90 as of the dissolution date. Also implicated was whether goodwill had to be included in valuing the interest of a partner who wrongfully caused dissolution when the remaining partners elected to continue the business.

Rule

If a partnership agreement contemplates continuation for a term or until a specified objective is met, it is not a partnership at will. When dissolution is caused in contravention of such an agreement, the nonwrongful partners may continue the business and pay or secure payment of the wrongfully dissolving partner's interest, but in ascertaining that interest the value of the goodwill of the business shall not be considered. A finding of wrongful dissolution is supported where a partner willfully and persistently breaches the agreement or conducts himself in partnership matters so as to render it reasonably impracticable to carry on the business with him.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Tulsa, Maya Rios, Colin Webb, and Ethan Park orally form a property-management partnership. They agree that Colin and Ethan will front $90,000 to buy client accounts, and the business will continue until that advance is repaid from business receipts. Six months later, before repayment, Maya announces she may dissolve whenever she wants because nothing was put in writing.

If a court follows the majority rule from this case, which is the strongest conclusion?

Explanation. A partnership is not at will when the agreement contemplates continuation for a term or until a specified objective is met. The majority treated an agreement lasting at least until repayment of a capital advance from gross earnings as sufficient to take the arrangement out of the at-will category, even though the agreement was oral and lacked a fixed date.