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Keywords

appealtrialfiduciarypartnershipfiduciary dutygood faith
plaintiffdefendantfiduciarytrustpartnershipfiduciary dutygood faithappellantappellee

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Svihl v. Gress, 216 N.W.2d 110

Facts

Albert D. Svihl and George J. Gress entered into an unwritten partnership agreement in 1970 to operate Gress & Svihl Trucking. Disputes arose when Gress refused Svihl access to partnership assets and began disposing of them. After the partnership was dissolved on August 24, 1971, Gress continued to use partnership assets for personal gain without accounting to Svihl. The trial court found that a partnership existed and made determinations regarding the division of assets and profits, which Svihl appealed.

Plaintiff-appellant, Albert D. Svihl, hereinafter referred to as Svihl, brought an action alleging that he and defendant-appellee, George J. Gress, hereinafter referred to as Gress, entered into an unwritten partnership agreement on or about October 1, 1970, under the firm name of Gress & Svihl Trucking to engage in the business of transporting livestock.

Issue

Whether Gress was required to account for profits derived from the use of partnership assets after the dissolution of the partnership and whether Svihl was entitled to a share of those profits.

Whether Gress was required to account for profits derived from the use of partnership assets after the dissolution of the partnership and whether Svihl was entitled to a share of those profits.

Rule

Partners owe each other a fiduciary duty to act with utmost good faith and integrity in their dealings, and they must account for any benefits derived from partnership assets without the consent of the other partners.

The conduct of partners during liquidation as well as during any transaction connected with the formation or conduct of the partnership is governed by a fiduciary duty which requires every partner to act with the utmost good faith and integrity in the dealings with one another with respect to partnership affairs and to account to the partnership for any benefit and hold as a trustee for the partnership any profits derived by him without the consent of the other partners.

Analysis

The court determined that Gress continued to use partnership assets for his personal gain after the dissolution of the partnership and failed to demonstrate that he had purchased those assets in accordance with his fiduciary duty. As a result, the court held that the assets remained partnership property, and Svihl was entitled to a share of the profits generated from those assets until final accounting.

In view of the standard of conduct Gress is held to and the absence of any evidence in the record showing a sale of the cattle trailer by Gress for the partnership to himself in his personal capacity with the knowledge and consent of Svihl, such self-dealing cannot be condoned.

Conclusion

The Supreme Court reversed the lower court's judgment and remanded the case with instructions, affirming that Svihl was entitled to a share of the profits from the partnership assets used by Gress after dissolution.

Reversed and remanded with instructions.

Who won?

Albert D. Svihl prevailed in the appeal because the court found that Gress had a fiduciary duty to account for profits derived from partnership assets and that Svihl was entitled to a share of those profits.

The Supreme Court, Erickstad, C.J., held that (1) where a partnership asset continued to be used by defendant for his personal gain subsequent to dissolution but prior to final accounting, and where defendant made no showing that he purchased that asset from the partnership in accordance with his fiduciary duty to his copartner, a sale of such asset by the partnership to defendant would not be presumed and the asset continued to be a partnership asset.

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