## Facts

- Three physicians, including Dr. Adams and Dr. Jarvis, practiced in a medical partnership (the Tomahawk Clinic) governed by a written partnership agreement.
- The agreement provided that a partner’s withdrawal would not terminate the partnership; the business would continue with the remaining partners.
- The agreement specified the withdrawing partner’s compensation as (1) any balance to his credit on the books, (2) his proportionate share of profits computed on a fiscal-year basis, and (3) his capital account as of the withdrawal date.
- The agreement expressly stated that accounts receivable remained property of the continuing partnership and were excluded from the withdrawing partner’s payout.
- Adams withdrew around June 1, 1961, and sought treatment of his withdrawal as a dissolution requiring liquidation and distribution of a one-third share of partnership value, including accounts receivable.
- The trial court treated the withdrawal as a dissolution requiring liquidation and awarded Adams a one-third share of net worth including accounts receivable.
- The remaining partners appealed, disputing both liquidation and Adams’s claimed entitlement to accounts receivable.

## Issues

1. Whether a partner’s withdrawal constitutes a dissolution requiring termination and liquidation notwithstanding an agreement providing for continuation.
2. Whether a withdrawing partner is entitled to a share of partnership accounts receivable when the agreement allocates receivables to the continuing partners.

## Decision

- The Wisconsin Supreme Court reversed and remanded.
- The court held that a partner’s withdrawal effects a statutory “dissolution” as to the withdrawing partner, but does not compel termination of the business or liquidation where a valid agreement provides for continuation.
- The court held that Adams was not entitled to any share of accounts receivable beyond the agreement’s payout formula; receivables remained with the continuing partnership.
- The case was remanded for an accounting consistent with the contractual method of settling the withdrawing partner’s interest.

## Legal Principles

- Under Wisconsin’s Uniform Partnership Act, dissolution is a change in partner relations caused by a partner ceasing to be associated in carrying on the business; dissolution does not itself require termination, because the partnership continues until winding up is completed.
- Partnership agreements may validly provide that, upon a partner’s withdrawal, the business continues with the remaining partners and the withdrawing partner’s interest is settled by a contractual formula rather than liquidation of all assets.
- Courts will enforce continuation-and-withdrawal provisions, including allocation of accounts receivable to continuing partners, when the agreement serves a legitimate purpose and does not impair creditor rights.
- In professional partnerships, contractual arrangements that permit continuity of services and specify a defined buyout for a withdrawing partner are enforceable absent overreaching or unfairness.

## Conclusion

The court enforced the clinic’s continuation agreement, holding that Adams’s withdrawal dissolved only his relationship to the partnership and required an accounting under the contract—not liquidation of the practice—and that he had no contractual right to share in accounts receivable.


Adams v. Jarvis, 23 Wis. 2d 453, 127 N.W.2d 400 (Wis. 1964)