Weeks v. McMillan

• Decision Date: 11 November 1986
• Docket Number: No. 0866,0866
• Citation: 353 S.E.2d 289,291 S.C. 287
• Court: South Carolina Court of Appeals
• Parties: William C. WEEKS, Individually and as a partner of Harris, McMillan, Hudgins & Co., a general partnership, Respondent, v. W.M. McMILLAN, Sara B. Penn, Robert Cooper, and Toni McKinley, Individually and as partners of Harris, McMillan, Hudgins & Company, a general partnership, and Harris, McMillan, Hudgins & Company, a general partnership, Appellants. . Heard

Page 289

353 S.E.2d 289

291 S.C. 287

William C. WEEKS, Individually and as a partner of Harris McMillan, Hudgins & Co., a general partnership, Respondent, v. W.M. McMILLAN, Sara B. Penn, Robert Cooper, and Toni McKinley, Individually and as partners of Harris, McMillan Hudgins & Company, a general partnership, and Harris McMillan, Hudgins & Company, a general partnership, Appellants.

No. 0866.

Court of Appeals of South Carolina.

Heard Nov. 11, 1986.

Decided Feb. 2, 1987.

O.W. Bannister, Jr., of Hill, Wyatt & Bannister, and R. Frank Plaxco, of Leatherwood, Walker, Todd & Mann, Greenville, for appellants.

Jesse C. Belcher, Jr., and Donald L. Ferguson, of Haynsworth, Perry, Bryant, Marion & Johnstone, Greenville, for respondent.

CURETON, Judge.

Respondent William C. Weeks commenced this action for a court ordered confirmation of the dissolution of a partnership and for an accounting of his interest in the partnership. The remaining partners and the partnership counterclaimed for enforcement of a 1980 partnership agreement which they claimed precluded the dissolution and also contained a noncompetition clause which had been violated by Weeks. Weeks' reply alleged the 1980 agreement was void. From an order of the trial court ordering dissolution and an accounting, the partnership and remaining partners appeal. We affirm in part, reverse in part and remand.

In 1974, Weeks joined an established public accounting firm known as Harris, McMillan, Hudgins & Co. In 1980, appellant Sara Penn was admitted as a partner and a new partnership agreement was executed by all of the partners. Hudgins and Harris subsequently retired from the partnership and the partners agreed to admit appellants Robert Cooper and Toni McKinley as partners in 1983, but no new partnership agreement was executed. By early 1984, Weeks had become disgruntled with the partnership and gave notice on July 31, 1984 that he elected to dissolve it. After a short period of cooperation between Weeks and the remaining partners, he was denied access to the partnership's records and files. This action followed.

By agreement of the parties, this matter was referred to the Master In Equity for Greenville County with authority to enter a final order appealable to the South Carolina Supreme Court. The master found inter alia: (1) that the 1980 partnership agreement was not in effect in July 1984; (2) the partnership was a partnership at will; (3) Weeks dissolved the partnership on July 31, 1984 by notice to the other partners; (4) the partnership in existence after admission of the last two partners did not adopt the terms of the 1980 partnership agreement; (5) the partnership should wind up its affairs and account to Weeks by use of the accrual method of accounting; (6) Weeks should be awarded attorney fees; (7) the noncompetition clause in the 1980 agreement, even if applicable, is void against public policy, and unenforceable under the statute of frauds; and (8) Weeks was entitled to interest on all sums found due him from August 3, 1984.

The issues on appeal are: (1) whether Weeks is bound by the terms of the 1980 partnership agreement and if so, does the agreement prohibit dissolution of the partnership, and is the noncompetition covenant in the agreement enforceable against Weeks; (2) whether the master abused his discretion in ordering an accounting using the accrual method; (3) whether attorney fees and prejudgment interest should have been awarded to Weeks; and (4) whether the master abused his discretion in ordering the appellant partners to bear the expenses of winding up the partnership. We will address these issues seriatim.

DISSOLUTION AND THE NONCOMPETITION PROVISION

The threshold question in this appeal is whether the retirement of Hudgins and Harris and the admission of Cooper and McKinley effected a dissolution of the partnership. The master found that the change in the membership of the partnership resulted in a dissolution. We agree with the master. A dissolution is defined in Section 33-41-910, Code of Laws of South Carolina, 1976 as "the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as distinguished from the winding up of the business." The common law rule is that both the admission of a partner and the withdrawal of a partner will effect a dissolution. 60 Am.Jur.2d Partnership Sections 177 and 178 (1972); 68 C.J.S. Partnership Section 347 (1950).

While the authorities are not in total agreement on whether the Uniform Partnership Act changes the common law regarding the causes for dissolution, it is generally accepted that since the Uniform Act only incorporated in part the common We agree with the master that after the change in membership of the partnership in 1983, there then existed between the parties to this action a partnership in fact of indefinite duration, and an at will partnership. McPherson v. J.E. Sirrine & Co., 206 S.C. 183, 33 S.E.2d 501 (1945). A partnership at will is subject to dissolution by the act of one or more partners at any time. Id.

                law on dissolutions, other means of dissolution known to the common law are not precluded by the Act.   Fenner & Beane v. Nelson, 64 Ga.App. 600, 13 S.E.2d 694 (1941);  see, Karesh, Partnership Law And The Uniform Partnership Act In South Carolina, 4 S.C.L.Q. 111 (1951);  see also, 60 Am.Jur.2d Partnership Section 173 (1972).   We hold that the withdrawal of two partners and the admission of two other partners worked an ipso facto dissolution of the partnership represented by the 1980 agreement
                

The appellant partners also argue that the partnership existing after the change in membership adopted the provisions of the 1980 agreement and, thus, the partnership was not one at will. They further argue that because the partners adopted the 1980 agreement, Weeks is bound by the noncompetition clause in the agreement. We disagree. The 1980 agreement, even if adopted by the partners to this action, sets no definite time for termination of the partnership status and is, for all practical purposes, a partnership at will and subject to dissolution by Weeks. Id. Moreover, as we read the 1980 partnership agreement, dissolution at the behest of a partner is not precluded by its language. Finally, we find that regardless of whether or not some portions of the agreement were adopted by all of the partners in the new partnership, the evidence is essentially uncontradicted that Weeks voiced objection to being bound by the noncompetition provision after the change in membership of the partnership, and never thereafter affirmatively agreed to be bound by the provision. Like any other contract, Weeks cannot be bound by partnership terms to which he did not agree. In any event, the appellants have not appealed the alternative finding of the master that the covenant is unenforceable under the statute of frauds. Where a decision is based on alternative grounds, either of which independent of the other is sufficient to support it, the decision will not be reversed even if one of the grounds is erroneous. See, Dwyer v. Tom Jenkins Realty, Inc., 289 S.C. 118, 344 S.E.2d 886 (Ct.App.1986).

ACCRUAL METHOD OF ACCOUNTING

We find no abuse of discretion in the master's finding that the accounting should be accomplished by the accrual method. Black's Law Dictionary 18 (5th ed. 1979) defines the accrual method of keeping accounts as the method "which shows expenses incurred and income earned for a given period, although such expenses and income may not have been actually paid or received." Appellant partners claim that the accrual method of accounting would work an injustice to them because it would, among other things, cast upon them the total risk of uncollectible accounts. This contention is without merit since obvious adjustments can and should be made for uncollectible accounts and other contingencies. It is interesting to note that one of the appellants' exhibits reflects Weeks' interest in the partnership as of December 31, 1984 utilizing the accrual method.

ATTORNEY FEES

We agree with the appellant partners that the master committed an error of law in awarding attorney fees to Weeks. As a general rule, attorney fees are not recoverable absent authorization by contract or statute. Duke Power Co. v. South Carolina Public Service Commission, 284 S.C. 81, 326 S.E.2d 395 (1985). Recognizing this general rule, the master attempted to carve out an exception to the rule by holding that because appellant partners acted in bad faith causing Weeks to have to bring an action for dissolution and accounting Segall involved an action brought by shareholders of two corporations who were beneficiaries under the will of Max Shore, and a co-executrix of his will, principally against Reuben and Sidney Shore, who were also co-executors under the will as well as officers and directors of the two corporations and surviving partners of a partnership in...