Woodruff v. Bryant

• Decision Date: 10 November 1977
• Docket Number: No. 1210,1210
• Citation: 558 S.W.2d 535
• Parties: Wallace P. WOODRUFF et al., Appellants, v. Lillie O. BRYANT et al., Appellees.
• Court: Texas Court of Appeals

Page 535

558 S.W.2d 535

Wallace P. WOODRUFF et al., Appellants,

v. Lillie O. BRYANT et al., Appellees.

No. 1210.

Court of Civil Appeals of Texas, Corpus Christi.

Nov. 10, 1977.

Rehearing Denied Dec. 8, 1977.

Richard B. Stone, Stone, Berryman & Giles, Corpus Christi, for appellants.

Donald B. Dailey, Jr., Tinker & Dailey, Richard J. Hatch, Mahoney, Shaffer, Hatch & Layton, Corpus Christi, for appellees.

OPINION

NYE, Chief Justice.

This is a partnership case. Plaintiffs and Defendant, Lillie Bryant, were all partners in a small business named "Flour Bluff Finance Company." Plaintiffs brought suit against Mrs. Bryant for breach of her fiduciary duties not to engage in a similar competing business. Plaintiffs also sued Defendants, James C. Bryant and Harold Easley, for enticing her to breach her fiduciary duties in forming and operating a similar business close to the Flour Bluff Finance Co. Mrs. Bryant cross-claimed for her partnership share of the partnership assets. Trial was to a jury on special issues. The jury answered the issues against Plaintiffs' claims and for Mrs. Bryant on her cross-claims. The trial court entered a take nothing judgment as to the Plaintiffs and awarded Mrs. Bryant a $7,917.75 judgment representing her one-fourth interest in the partnership assets against the Plaintiffs on her cross-action. The Plaintiffs have duly perfected their appeal from this judgment.

Wallace Woodruff, W. B. Stanton and Charles Postel entered into a partnership business forming the Flour Bluff Finance Company. The company was to engage in a small unsecured loan business dealing primarily with loans between $5 $100 in the Flour Bluff area of Corpus Christi. The company was regulated and licensed by the consumer credit commission under Article 5069-1.01 et seq., Tex.Rev.Civ.Stat.Ann. In March of 1969 Howard Barth purchased W. B. Stanton's one-third interest in the partnership for $12,000.00 and Don Woodruff purchased Charles Postel's one-third interest for $12,000.00. In June of 1969, the company hired Lillie Bryant to be the manager of the company. In November of 1969 Lillie Bryant was made a partner in the company; acquiring a one-fourth interest through the payment of $3,000.00 to each of the then partners.

In February, 1971 a dispute arose between Mrs. Bryant and Wallace Woodruff, the company's attorney, over the policy of filing collection suits on the overdue accounts. A partnership meeting was held and a majority of the partners voted to continue the policy of filing suits on the overdue accounts. A couple of months later, Mrs. Bryant resigned as manager and tendered her one-fourth interest to the other partners for sale for $12,000.00. The partners took no action on Mrs. Bryant's letter. Shortly thereafter she left her employment with the company. Mrs. Bryant continued to receive her share of the partnership profits however, even after leaving the company.

In early January, 1972 "Pay Day Loans" began business approximately 100 feet from Flour Bluff Finance Company, making the same type of loans as did Flour Bluff Finance Company. Pay Day Loans was owned by a partnership composed of James Bryant, Harold Easley and James Layton. It was managed by Lillie Bryant until the summer of 1973. Pay Day Loans was sold in November, 1975 and Flour Bluff Finance Company went out of business in March of 1976.

The original cause of action, which is the subject matter of this appeal, was filed in September of 1972. The Plaintiffs sought recovery from Mrs. Bryant, her husband, Mr. Bryant, and Pay Day Loans for breach of a partner's fiduciary duty not to compete, for $75,000.00 in actual and punitive damages, and for a temporary injunction to prevent Lillie Bryant from working for Pay Day Loans. Mrs. Bryant answered the Plaintiffs' claims with a general denial and a cross-action seeking to recover her monetary interest in the partnership. The Plaintiffs' trial petition alleged a cause of action against both Bryants, Harold Easley's widow and estate, and Pay Day Loans for unlawful competition and interference with contractual rights.

The jury, in response to the special issues submitted, found: 1) that Mrs. Bryant intended to dissolve the partnership on April 27, 1971; 2) that Mrs. Bryant ceased to be associated with Flour Bluff Finance Company prior to becoming associated with Pay Day Loans; 3) that Pay Day Loans was a competitor of Flour Bluff Finance Company from January 1, 1972 to November, 1975; that James Bryant (Issue No. 4) and Harold Easley (Issue No. 7) did not induce Mrs. Bryant to assist in forming and engaging in the business of Pay Day Loans (Special Issues No. 5, 6, 8 and 9 were not answered); that Flour Bluff Finance Company was not entitled to any compensation as actual (Issue No. 10) or punitive (Issue No. 11) damages from Pay Day Loans; and 12) that the reasonable net cash market value of Flour Bluff Finance Company partnership on July 27, 1971 was $31,671.00. Based on these findings by the jury, the trial court entered the aforesaid judgment.

The first question presented by this appeal is whether or not the partnership between Mrs. Bryant, Wallace Woodruff, Don Woodruff and Howard Barth d/b/a Flour Bluff Finance Company was dissolved by Mrs. Bryant's letter of April 27, 1971. The Uniform Partnership Act of Texas (Art. 6132a, et seq) discusses three entirely different concepts: "dissolution"; "winding up"; and "termination". See McKellar v. Bracewell, 473 S.W.2d 542 (Tex.Civ.App. Houston (1st Dist.) 1971, writ ref'd n. r. e.). Dissolution is defined as the change in the relationship of the partners caused by any partner ceasing to be associated in the carrying on of the partnership as distinguished from the winding up of the business. See Art. 6132b § 29, Tex.Rev.Civ.Stat.Ann. (1970). Generally when a partnership is dissolved, the partnership continues during the period of winding up until all preexisting matters are terminated. See Art. 6132b § 30, Tex.Rev.Civ.Stat.Ann. (1970). Howell, Texas Practice, Vol. 19 § 182 (1973). Dissolution is an act that actually changes the legal relationship of the partnership, and has nothing to do with whether or not the partnership business is continuing or winding up. It is a technical legal concept, unlike the concept of dissolution in other areas, such as corporations. Causes of dissolution are set out in §§ 31 and 32 of the Partnership Act. The causes set out in § 31 are automatic and dissolution occurs immediately upon the happening of the specified event.

At common law a partner could dissolve the partnership by giving explicit notice to the other partners. Green v. Waco State Bank, 78 Tex. 2, 14 S.W. 253 (1890). Section 31 codifies this common law rule by providing that dissolution can be caused by the "express will" of any partner. But, dissolution does not necessarily terminate the partnership business. Even if the business is to be discontinued, the partnership continues to exist, at least for the limited purpose of winding up. Boyd v. Leasing Associates, Inc., 516 S.W.2d 485 (Tex.Civ.App. Houston (1st Dist.) 1974, writ ref'd n. r. e.); Howell v. Bowden, 368 S.W.2d 842 (Tex.Civ.App. Dallas 1963, writ ref'd n. r. e.). See § 30, Art. 6132b. It is only upon termination that the final partnership relationship ceases to exist.

Plaintiffs contend in effect that special issues one and two cannot form the basis of the $7,917.75 award to Lillie Bryant representing her partnership interest in Flour Bluff Finance Company because: 1) she failed to follow the dissolution procedures enumerated in the partnership agreement; 2) that there is no evidence and 3) there is insufficient evidence to support the answers to issues one and two. We agree with their third contention.

Plaintiffs argue that Bryant's power to dissolve the partnership could only be exercised if she complied with these contractual dissolution procedures. This is not so. The Texas Uniform Partnership Act codifies the common law rule so that every partner has the inherent power to dissolve his partnership even though the partnership agreement might attempt to limit that partner's right to dissolve the partnership. This would be true even though in some circumstances, the exercise of this right to dissolve might constitute a breach of the partnership agreement and render the dissolving partner liable for damages resulting from the breach. See Art. 6132b §§ 31, 32, 38, Tex.Rev.Civ.Stat.Ann. (1970); Collins v. Lewis, 283 S.W.2d 258 (Tex.Civ.App. Galveston 1955, writ ref'd n. r. e.); Bluestein v. Davis, 86 Ill.App.2d 61, 230 N.E.2d 61 (1967); Hamilton, Texas Practice, Vol. 19 § 190, pp. 183-85 (1973).

Next, plaintiffs attack the jury's findings in special issues one and two because there is no evidence or insufficient evidence to support the jury's answers to these issues. In special issue one the jury found that Lillie Bryant intended to dissolve the partnership on April 27, 1971; and in special issue two the jury found that Lillie Bryant's association with Flour Bluff Finance Company ceased prior to her association with Pay Day Loans. A "no evidence" point is a question of law and our review requires us to consider only the evidence and inferences which support the questioned jury findings, disregarding all evidence and inferences to the contrary. Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.Sup.1965). Calvert, "No Evidence" and "Insufficient Evidence" Points of Error, 38 Texas L.Rev. 361, 362-63 (1960).

Lillie Bryant testified that in January or February 1971 she became dissatisfied with the partnership policy of filing suit on delinquent accounts. She discussed her dissatisfaction individually with the other partners and at a subsequent partnership meeting the other partners voted to continue the policy. On April 27, 1971 she wrote a letter ¹ to the other partners in which she stated that she was resigning as an employee of the partnership and was offering to sell her share in the...