Collins v. Lewis

Brief Fact Summary. Appellant, Carr P. Collins, petitioned for a dissolution of his partnership with Appellee, John L. Lewis, because the start-up costs were excessive and the business had failed to turn a profit.

Synopsis of Rule of Law. A partner does not have the right to dissolve a partnership when his conduct is the only conduct that is adversely affecting the business.

Facts. Appellant and Appellee agreed to form a partnership to run a cafeteria business together. The agreement stipulated that Appellant would provide the financial backing while Appellee would manage the business. Startup costs were twice as much as originally estimated, but evidence presented by Appellee showed that much of the overrun was due to unforeseeable external circumstances. Once the business was up and running, it failed to turn a profit, but Appellee presented proof that Appellant’s interference in the management of the business played a significant role in the non-profitability. Appellant argued that because the business was unprofitable and because they were in hopeless disagreement that a dissolution of the business should be granted.

Issue. The issue is whether Appellant stated a cause for granting dissolution of the partnership.

Held. The petition for dissolution should not be granted because the party petitioning for the dissolution is the only party that is not abiding by the partnership agreement. The agreement provided that Appellee would manage the business while appellant provided the financial support. Appellee convinced a jury that he was providing sound management, and any problems affecting the business were due to unforeseen circumstances or due to Appellant’s meddling in management. The court did not want to reward Appellant’s behavior by granting a dissolution.

Discussion. A partner will not be granted a dissolution when the partners are in hopeless disagreement if the partners are still able to fulfill their obligations of the contract. Barring an agreement otherwise, a partner should be protected from another partner dissolving a business when they have followed the agreement.