Colorado § 7-60-138 - Application of partnership property.

§ 7-60-138. Application of partnership property.

(1) When dissolution is caused in any way, except in contravention of the partnership agreement, each partner as against the other partners and all persons claiming through them in respect of their interests in the partnership, unless otherwise agreed, may have the partnership property applied to discharge its liabilities and the surplus applied to pay in cash the net amount owing to the respective partners. But if dissolution is caused by expulsion of a partner, bona fide under the partnership agreement, and if the expelled partner is discharged from all partnership liabilities, either by payment or agreement under section 7-60-136 (2), the expelled partner shall receive in cash only the net amount due the expelled partner from the partnership.

(2) When dissolution is caused in contravention of the partnership agreement, the rights of the partners shall be as follows:

(a) Each partner who has not caused dissolution wrongfully shall have:

(I) All the rights stated in subsection (1) of this section;

(II) The right, as against each partner who has caused the dissolution wrongfully, to damages for breach of the agreement.

(b) The partners who have not caused the dissolution wrongfully, if they all desire to continue the business in the same name either by themselves or jointly with others, may do so during the agreed term of the partnership and for that purpose may possess the partnership property, if they secure the payment by bond approved by the court or pay to any partner who has caused the dissolution wrongfully the value of such partner's interest in the partnership at the dissolution, less any damages recoverable under subparagraph (II) of paragraph (a) of this subsection (2), and in like manner indemnify such partner against all present or future partnership liabilities.

(c) A partner who has caused the dissolution wrongfully shall have:

(I) If the business is not continued under the provisions of paragraph (b) of this subsection (2), all the rights of a partner under subsection (1) of this section, subject to paragraph (a)(II) of this subsection (2);

(II) If the business is continued under paragraph (b) of this subsection (2), the right as against the other partners and all claiming through them, in respect of their interests in the partnership, to have the value of such partner's interest in the partnership, less any damages caused to the other partners by the dissolution, ascertained and paid to such partner in cash or the payment secured by bond approved by the court, and to be released from all existing liabilities of the partnership; except that, in ascertaining the value of such partner's interest, the value of the goodwill of the business shall not be considered.

Source: L. 31: p. 667, § 38. CSA: C. 123, § 38. CRS 53: § 104-1-38. C.R.S. 1963: § 104-1-38. L. 2003: (2)(a)(I) amended, p. 2236, § 114, effective July 1, 2004. L. 2004: (1), (2)(b), and (2)(c)(II) amended, p. 1429, § 93, effective July 1.

ANNOTATION

Partnership property converted into cash. This section embodies the essence of the rule that in an action for a partnership accounting and dissolution the entire partnership property will be converted into cash. Davis v. Davis, 149 Colo. 1, 366 P.2d 857 (1962).

Date of dissolution if by court decree. Where trial court record was replete with statements by partner of unwillingness to participate in partnership, the date partner filed action under § 7-60-132 was properly declared the date of dissolution for purposes of valuation of partnership interests. Master Garage, Inc. v. Bugdanowitz, 690 P.2d 879 (Colo. App. 1984).