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Keywords

contracttrialfiduciarypartnershipfiduciary dutybreach of fiduciary dutyrespondentappellant

contracttrialfiduciarytrustpartnershipfiduciary dutyrespondentappellant

Related Cases

Corley v. Ott, 326 S.C. 89, 485 S.E.2d 97

Facts

Appellant Ott held an option to purchase a tract of land known as Lakewood Estates. Without disclosing his option, Ott approached respondent Corley about providing the capital to purchase the land. Ott signed a contract to individually purchase Lakewood Estates for $171,200 and had the property transferred to a third party to conceal this purchase from Corley. Later, Ott and Corley formed a partnership and purchased the same property for $198,200, with Ott receiving a total of $27,000 from the partnership payments and the 34.68-acre pond tract valued at $41,000.

Appellant Ott held an option to purchase a tract of land known as Lakewood Estates. Without disclosing his option, Ott approached respondent Corley about providing the capital to purchase the land and 'making some money on it.' Corley agreed. On March 30, 1979, Ott signed a contract to individually purchase Lakewood Estates including 128 lots, a 34.68 acre lot called the 'pond tract,' and a water plant, for a purchase price of $171,200. Ott had the property transferred to a third party as trustee in order to conceal this purchase from Corley.

Issue

1. Should Ott's time and labor be credited as capital contributions? 2. Does the evidence support the trial judge's finding that Ott breached his fiduciary duty?

Rule

Upon dissolution of a partnership, the liabilities of the partnership rank in order of payment as follows: third-party debts, debts to partners, return of capital to partners, profits to partners. S.C.Code Ann. § 33–41–1060(2) (Supp.1996) provides that no partner is entitled to remuneration for acting in the partnership business.

Analysis

The court applied the rule that a partner's services are not considered capital contributions upon dissolution in the absence of an agreement to the contrary. Since there was no evidence of such an agreement between Ott and Corley, the trial judge properly refused to credit Ott's contributions of time and labor as capital contributions. Additionally, the court found that Ott's failure to disclose his prior purchase of the property was a breach of fiduciary duty, as it was closely connected to the formation of the partnership.

In this case, there is no evidence of any agreement between the partners that Ott's services should be credited as capital contributions. Accordingly, the trial judge properly refused to credit them as such.

Conclusion

The court affirmed the trial judge's decision, ruling that Ott was not entitled to credit for his contributions and that he breached his fiduciary duty to Corley.

Ott contends he breached no fiduciary duty on March 30, 1979, the date of the purchase contract, because the partnership did not yet exist as evidenced by the written partnership agreement signed September 28, 1979. We disagree.

Who won?

Corley prevailed in the case because the court found that Ott's actions constituted a breach of fiduciary duty, resulting in financial harm to Corley.

Corley, who provided the capital for the purchase, was damaged in the amount of $27,000, the difference in the purchase price, plus $41,000, the value of the pond tract, for a total of $68,000.

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