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Adams v. Jarvis - 23 Wis. 2d 453, 127 N.W.2d 400 (1964)

Rule:

If a partnership agreement provides for continuation after the withdrawal of a partner, sets forth a method of paying the withdrawing partner his agreed share, and does not jeopardize the rights of creditors, the agreement is enforceable.

Facts:

The parties entered into a partnership agreement governing several doctors at a Clinic. Among other things, the agreement provided that the withdrawal of one partner would not constitute dissolution of the partnership. The former partner ceased to be a partner in the partnership and he alleged that the partnership should have been dissolved and that he was entitled to his distributive share. The former partner asserted that the provision of the partnership agreement that denied him a share of the accounts receivable was void as against public policy. The trial court decided that the withdrawal of the plaintiff worked a dissolution of the partnership under sec. 123.25, Stats. Defendant partners sought review of the decision of the County Court of Lincoln County (Wisconsin), which entered judgment in favor of plaintiff former partner in the action brought by the former partner to determine rights under a partnership agreement. 

Issue:

Did plaintiff doctor's withdrawal dissolve the partnership under § 123.25, Wis. Stats.?

Answer:

No

Conclusion:

On appeal, the court held that the trial court's judgment was improper. The court found that, although, Wis. Stat. § 123.25 stated that a partnership was dissolved upon the withdrawal of a partner, the partnership could continue so long as the partnership agreement set forth a method of paying the withdrawing partner his agreed share and did not jeopardize the rights of creditors. The court determined that the partnership was not wholly dissolved upon the former partner's withdrawal. The court concluded that the parties to the agreement intended accounts receivable to be restricted to customer or patient accounts receivable and the applicable provisions in the partnership agreement were enforceable.

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