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A partnership at will is a partnership which has no definite term or particular undertaking and can rightfully be dissolved by the express will of any partner. Wis. Stat. § 178.26(1)(b). In a partnership at will, partners can rightfully dissolve the partnership with or without the consent of a dissenting partner. Unless otherwise agreed, partners who have not wrongfully dissolved a partnership have a right to wind up the partnership. Wis. Stat. § 178.32. Winding-up is the process of settling partnership affairs after dissolution. Winding-up is often called liquidation and involves reducing the assets to cash to pay creditors and distribute to partners the value of their respective interests. Thus, lawful dissolution, or dissolution that is caused in any way except in contravention of the partnership agreement, gives each partner the right to have the business liquidated and his share of the surplus paid in cash. In-kind distribution is permissible only in very limited circumstances. If the partnership agreement permits in-kind distribution upon dissolution or wind-up or if, at any time prior to wind-up, all partners agree to in-kind distribution, the court may order in-kind distribution.
The plaintiffs and the defendant, all brothers, formed a partnership to operate two feed mills. However, there were no written Articles of Partnership governing the relationship. On October 4, 1975, the plaintiffs served the defendant with a notice of dissolution and wind-up of the partnership. The action for dissolution and wind-up was commenced on January 27, 1976. The dissolution complaint alleged that the plaintiffs elected to dissolve the partnership. There was no allegation of fault, expulsion or contravention of an alleged agreement as grounds for dissolution. The parties were unable, however, to agree to a winding-up of the partnership. In one of the hearings on the dissolution, the defendant requested that the partnership be sold pursuant to sec. 178.33(1), Stats., and that the court allow a sale, at which time the partners would bid on the entire property. The trial court denied defendant’s request for a sale and instead divided the partnership assets-in kind according to the valuation presented by the plaintiffs. The defendant challenged the decision.
Could the trial court order an in-kind distribution of the partnership’s assets in the absence of any agreement of the partners?
The Court reversed the trial court’s decision, and held that it would not read § 38 of the Uniform Partnership Act, or Wis. Stat. § 178.33(1), as permitting an in-kind distribution under any circumstances, unless all partners agree. Section 178.33(1), and § 38 of the Act were quite clear that if a partner forced liquidation, he was entitled to his share of the partnership assets, after creditors were paid in cash. A sale was the best means of determining the true fair market value of partnership assets. Generally, liquidation envisioned some form of sale. Because the applicable statutes provided that, unless otherwise agreed, any partner who had not wrongfully dissolved the partnership had the right to wind up the partnership and force liquidation, he likewise had a right to force a sale, unless otherwise agreed.