Zimmerman v. Harding
Headline: Affirms that a partner who unlawfully excludes a co-owner must account for profits and that suing at law does not bar an equity accounting, affecting partners in joint businesses.
Holding: The Court held that suing at law did not prevent seeking an equity accounting, affirmed the lower court, and required the partner who wrongly excluded the other to account for profits made during that period.
- Allows excluded partners to recover profits through law and equity.
- Confirms partnership property remains jointly held after attempted unilateral dissolution.
- Permits courts to wind up affairs and appoint receivers to protect excluded partners.
Summary
Background
Mrs. Zimmerman and Mr. Harding were partners running a hotel under a lease. There was no express written term, but the court read the partnership to run for the lease term under Porto Rico Civil Code §§1607 and 1609. On August 9, 1911 Mrs. Zimmerman declared the partnership ended and excluded Harding from control. The lower court found no good reason for that unilateral dissolution, allowed Mr. Zimmerman to continue managing the business, and later dissolved the partnership by decree on May 18, 1912. Harding had sued at law for damages and also filed a bill in equity seeking a receiver and winding up.
Reasoning
The central question was whether bringing the law suit prevented Harding from also getting relief in equity, and whether Mrs. Zimmerman’s action lawfully ended the partnership. The Court said the election-of-remedies rule did not apply because both the law suit and the equity bill sought money damages based on the same facts and were not inconsistent. The equity bill did not ask to restore the partnership; it sought liquidation and a receiver because ongoing cooperation was impossible. The Court therefore upheld the lower court’s finding that the partnership continued until the decree and held Mrs. Zimmerman accountable for Harding’s share of profits earned while she excluded him. The Court noted procedural irregularities in the record and questioned allowing a salary to Mrs. Zimmerman, but found no preserved objection.
Real world impact
The ruling means a partner who wrongfully excludes a co-owner can be forced to account for profits made during that exclusion. An excluded partner may pursue damages at law and still obtain an equitable accounting. Partnership property remains joint property even after an attempted unilateral dissolution, and courts can wind up affairs to protect the absent partner. The decree of the lower court was affirmed.
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