## Facts

- Charles E. Corley III and Fred E. Ott entered a real estate venture to acquire and develop a subdivision known as Lakewood Estates as a general partnership.
- Ott held an undisclosed option to purchase Lakewood Estates and solicited Corley to provide capital to buy the property.
- On March 30, 1979, Ott executed a contract in his individual capacity to purchase Lakewood Estates (including 128 lots, a 34.68-acre “pond tract,” and a water plant) for $171,200.
- Ott arranged for title to be placed with a trustee to conceal his individual purchase from Corley.
- The trustee contracted the same day to convey the property to Ott and Corley as a partnership for $198,200, but without the pond tract.
- The installment-payment structure caused the partnership’s payments to generate a spread payable to Ott; Ott received $27,000 through this mechanism.
- Ott separately received the pond tract, valued at $41,000 at the time of conveyance.
- The parties later executed a written partnership agreement dated September 28, 1979.
- In 1990, Corley sued to dissolve the partnership; during litigation he discovered Ott’s concealed transaction and amended to allege breach of fiduciary duty.
- The trial court awarded Corley $68,000 in damages, representing Ott’s $27,000 spread plus the $41,000 value of the pond tract.

## Issues

1. Whether Ott’s time and labor in improving the property should be credited as capital contributions in the final partnership accounting.
2. Whether the evidence supported the finding that Ott breached fiduciary duties by concealing material facts and taking secret profits from the partnership transaction.

## Decision

- The Supreme Court of South Carolina affirmed the final accounting and the $68,000 judgment against Ott.
- The court held that, absent an agreement, a partner’s services are not treated as capital contributions upon dissolution.
- The court held that the evidence supported the finding that Ott breached fiduciary duties by nondisclosure and by retaining undisclosed benefits derived from the partnership transaction.

## Legal Principles

- Under South Carolina’s version of the Uniform Partnership Act, no partner is entitled to remuneration for acting in the partnership business absent an agreement; therefore, a partner’s labor is not a capital contribution in dissolution accounting without express agreement.
- Partners owe fiduciary duties of loyalty and full disclosure in partnership dealings; a partner may not structure a partnership transaction to obtain undisclosed side benefits or secret profits at a co-partner’s expense.
- Damages for breach of fiduciary duty may include recovery of secret profits and the value of partnership-related benefits diverted to the breaching partner.

## Conclusion

The court affirmed dissolution accounting rules that exclude partner services from capital absent agreement and upheld damages where a partner concealed a prior purchase arrangement and extracted undisclosed profits and property from a partnership acquisition.


Corley v. Ott, 485 S.E.2d 97 (S.C. 1997)