Swann v. Mitchell, 61809
| Decision Date | 14 July 1983 |
| Docket Number | No. 61809,61809 |
| Citation | 435 So.2d 797 |
| Parties | W.A. SWANN, Jr., etc., Petitioner, v. A.O. MITCHELL, et al., Respondents. |
| Court | Florida Supreme Court |
W.A. Swann, Jr., in pro. per.
Robert D. Bell and Raymon J. Hahn of Fisher, Bell, Hahn, Winn & Schuster, Pensacola, for respondents.
We review the opinion of the First District Court of Appeal in Swann v. Mitchell, 408 So.2d 681 (Fla. 1st DCA 1982), which directly conflicts with Obel v. Henshaw, 130 So.2d 892 (Fla. 3d DCA 1961), and Wiese v. Wiese, 107 So.2d 208 (Fla. 2d DCA 1958), on the same point of law. Art. V, § 3(b)(3), Fla. Const. (1972).
This case involves a partnership accounting. The respondents (defendants below), the Mitchells, own and operate an automobile dealership located in Pensacola and known as Mitchell Motors. The business was incorporated in approximately 1940 and operated as a corporation until October 1, 1954, at which time the entity converted to a partnership. The petitioner's deceased father, William Alfred Swann, Sr., served as business manager of Mitchell Motors from 1940 until 1967. In 1966 Swann entered into a partnership agreement with the Mitchells which provided that Swann would receive a five percent share of the profits and losses of the partnership. The agreement also provided that upon the death of Swann the partnership would pay Swann's personal representative Swann's share in the undistributed profits of the partnership up to the date of Swann's death.
In 1967, Swann retired as business manager of Mitchell Motors. On June 30, 1979, the Mitchells dissolved the partnership, without notifying or consulting Swann, and transferred all the assets of the partnership to a corporation. Seventy-five percent of the capital stock of the corporation was issued to the former Mitchell partners and twenty-five percent to the son of one of the Mitchell partners. The business essentially continued to operate as before. Swann was not notified of the conversion of the business to corporate form until early 1980 at which time he received a final payment from the business intended to represent his percentage of the profits of the partnership to the date of dissolution.
Swann then instituted this action for wrongful dissolution of the partnership and sought to be paid for a portion of the capital surplus, the value of the goodwill, the stock of the corporate successor to the partnership, and accounting and damages for wrongful dissolution. The trial court granted summary judgment for the Mitchells. The district court, finding that there were unresolved issues precluding judgment, reversed and remanded. The district court opinion stated:
Whether or not the parties by other agreements or conduct manifested an intention that any increment in partnership assets should not be subject to Swann's profit share, or indeed, whether there were any such assets over and above the capital contributions of the partners, are matters that await determination by the trial court after receiving evidence.
408 So.2d at 683. We agree with this portion of the opinion. However, the district court also went on to conclude that the goodwill of the business should not be considered in determining the extent of Swann's unpaid partnership interest. It is this portion of the opinion which appears to be in direct conflict with the previous decisions of our district courts of appeal in Obel v. Henshaw, 130 So.2d 892 (Fla. 3d DCA 1961), and Wiese v. Wiese, 107 So.2d 208 (Fla. 2d DCA 1958), and therefore the issue to be determined by this Court.
Paragraph 3(c) of the partnership agreement sets forth the rights of W.A. Swann as follows:
Upon the death of W.A. Swann the partnership shall ... pay his personal representative the share of W.A. Swann in the undistributed profits of the partnership up to the date of death.
The language of the partnership agreement between Swann and the Mitchells clearly appears to limit Swann's rights to his share in the undistributed profits of the partnership upon Swann's death. The district court agreed with the petitioner's (Swann's) contention that nothing in the partnership agreement indicated an intention to alter the accepted definition of "profit." The court, citing this Court's opinion in Uhrig v. Redding, 150 Fla. 480, 8 So.2d 4, 6 (1942), defined the accepted definition of profits to include the increment in the value of the capital assets. We agree with the district court's conclusion that nothing in the Uniform Partnership Act alters this definition of profit and therefore, it is proper to include the increment in the value of capital assets in determining profits in this case.
The goodwill of a business may be defined as the advantage or benefit the business has beyond the mere value of its property and capital. 8 Fla. Jur.2d Business Relationships § 493 (1978). Goodwill is usually evidenced by general public patronage and is reflected in the increase in profits beyond those that may be expected from the mere use of capital. Courts in other jurisdictions have defined goodwill as such. Agricultural Services Association v. Ferry-Morse Seed Co., 551 F.2d 1057 (6th Cir.1977); Freeling v. Wood, 361 P.2d 1061 (Okl.1961); Buck v. Mueller, 221 Or. 271, 351 P.2d 61 (1960); In re Estate of Glant, 57 Wash.2d 309, 356 P.2d 707 (1960); Copland v. Wisconsin Department of Taxation, 16 Wis.2d 543, 114 N.W.2d 858 (1962). Accordingly, goodwill should be recognized as an asset of a business, in the absence of a contract to the contrary, and taken into consideration in any sale or valuation of assets.
Courts have frequently recognized goodwill as an asset subject to consideration on an accounting between partners where its disposition is not controlled by the partnership articles and the dissolution was not caused by the wrongful act of one of the partners. Smith v. Bull, 50 Cal.2d 294, 325 P.2d 463 (1958); Barron v. Koenig, 80 Idaho 28, 324 P.2d 388 (1958); Adams v. Adams, 156 Neb. 540, 57 N.W.2d 131 (1953); Young v. Cooper, 30 Tenn.App. 55, 203 S.W.2d 376 (1947). It also appears to be a well established view in other jurisdictions to recognize goodwill as an accountable asset when the value of that goodwill survives the death of one of the partners. Didlake v. Roden Grocery Co., 160 Ala. 484, 49 So. 384 (1909); Rosenberg v. J.C. Penney Co., 30 Cal.App.2d 609, 86 P.2d 696 (Cal.Dist.Ct.App.1939); Succession of Conway, 215 La. 819, 41 So.2d 729 (1949).
In Obel v. Henshaw, a suit to dissolve a partnership, our Third District Court of Appeal specifically held that the goodwill of the partnership should be recognized as an asset of the partnership and taken into consideration in any sale of assets which may be ordered. The decision cited with approval the case of Wiese v. Wiese, a Second District Court of Appeal decision which stated:
"As might be expected, the assets of a partnership may include many types of property, or property rights: real property personal property, good will, patent rights, franchises and many others." Upon further proceedings in this cause the good will, if any, of the partnership should be recognized as an asset of the partnership and taken into consideration in any sale of assets which may be ordered.
Where some or all of the partners retain possession of any of the assets after dissolution of the partnership, whether their purpose is to use those assets to continue the business in another form or otherwise, they should be required to account to the partnership for the value of those assets at the time of dissolution. Section 620.66(1), Florida Statutes (1981), states:
Every partner must account to the partnership for any benefit, and hold as trustee for it any profits, derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property.
The partnership laws of this state also forbid any number less than all of the partners in a partnership to dispose of the goodwill of the business. § 620.60(3)(b), Fla.Stat. (1981).
It is unclear to us whether the district court in this cause did in fact consider goodwill to be an asset. They did state that goodwill is "a valuable commodity." We have established that it is an asset. The district court's decision to deny consideration of goodwill in determining Swann's unpaid partnership interest appears to be based on four factors. First, the court concluded that the value of goodwill would be "virtually impossible of determination without an actual sale of the ongoing business" and that no "sale" as such had occurred. 408 So.2d at 683. The court stated that a "sale" had not occurred because the partners remaining after Swann's retirement continued the business for twelve years and then transferred the assets to a corporation. We cannot agree with the district court's conclusion that the absence of an actual sale makes the value of the asset goodwill impossible of determination.
Upon dissolution of a partnership, the general rule is that it is the right of...
To continue reading
Request your trial
-
Thompson v. Thompson
...This Court has defined goodwill as the advantage or benefit a business has beyond the value of its property and capital. Swann v. Mitchell, 435 So.2d 797 (Fla.1983). In discussing goodwill in Swann we noted that it has been held that although a law firm could not be sued for ethical reasons......
-
Scherer v. Austin Roe Basquill, P.A.
...is one of the exclusive statutory duties owed by a partner to the partnership. § 620.8404(1), (2)(a) ; see also Swann v. Mitchell , 435 So. 2d 797, 800 (Fla. 1983) ("Where some or all of the partners retain possession of any of the assets after dissolution of the partnership, whether their ......
-
Moebus v. Moebus
...fees within sixty days of the order. The appellant also contends that the trial court erred in its application of Swann v. Mitchell, 435 So.2d 797 (Fla.1983), to this We agree that goodwill is not properly includable in the valuation of the husband's medical practice. This is an issue upon ......
-
Lutz v. Schmillen
...for a profit in that case, Weisbrod would have been entitled to receive his twenty percent interest in the profit. See Swann v. Mitchell, 435 So.2d 797, 799 (Fla.1983) (finding that it was proper to include the increment in the value of capital assets in determining profits); see also King,......
-
Buying and selling a small business
...of a business is “the advantage or benefit the business has beyond the mere value of its property and capital.” [ Swann v. Mitchell , 435 So. 2d 797, 799 (Fla. 1983) (citing 8 Fla. Jur.2d Business Relationships § 493 (1978)).] It is shown by “general public patronage and is reflected in the......