## Facts

- Charles Monin and Joseph E. “Sonny” Monin formed a partnership in 1967 to haul milk, with most of the business value tied to hauling milk for Dairymen Incorporated (DI).
- In July 1984, Sonny notified Charles of his intent to dissolve the partnership.
- The next day, Sonny informed DI that the partnership’s hauling contract would be cancelled effective the annual renewal date and indicated his desire to haul for DI after expiration.
- The brothers signed a Partnership Sales Agreement to liquidate partnership assets through a private auction between themselves, including equipment and “milk routes,” subject to DI’s approval; the agreement would be null if DI did not approve the transfer and included a noncompete covenant.
- At the private auction, Charles was the high bidder at $86,000, reflecting the partnership’s value including the DI hauling business.
- DI held a producers’ meeting and voted not to approve Charles as hauler, instead selecting Sonny.
- Sonny accepted DI’s business through Sonny Monin, Inc., obtaining the primary partnership asset without paying the partnership for it.
- Without the DI hauling contract, the remaining partnership assets were worth $22,000.
- Charles sued Sonny for breach of fiduciary duty and tortious interference; after a bench trial, the trial court ruled for Sonny, reasoning DI’s rejection reduced the partnership value from $86,000 to $22,000 and Sonny could accept DI’s contract.

## Issues

1. Whether a partner breaches fiduciary duty by pursuing and obtaining the partnership’s principal contract for personal benefit while the partnership is dissolving and winding up.
2. Whether the customer’s freedom to choose its contractor relieves a partner of fiduciary responsibility to the partnership during winding up.
3. What remedy is appropriate when a partner’s conduct diverts the value of a key partnership expectancy during winding up.

## Decision

- The Kentucky Court of Appeals reversed in part and held that Sonny breached his fiduciary duty during dissolution and winding up by securing DI’s hauling business for himself.
- The court rejected the view that fiduciary duties end upon notice of dissolution; the duty of loyalty continues until winding up is completed.
- Although DI was free to choose its hauler and was not bound by the partners’ auction, Sonny could not “bid against the partnership” for the business expectancy that constituted the partnership’s main asset.
- The court held Sonny liable for $64,000, the difference between the partnership’s value including the DI business ($86,000) and the value without it ($22,000).

## Legal Principles

- Partners owe fiduciary duties to the partnership and each other that continue through dissolution and the winding-up period.
- During winding up, a partner may not appropriate for personal benefit a partnership opportunity or business expectancy that is a principal partnership asset.
- A third party’s legal freedom to contract with whomever it chooses does not excuse a partner’s disloyal conduct toward the partnership while liquidation is pending.
- A breaching partner may be required to account for the value diverted from the partnership, measured by the loss in partnership value attributable to the usurped opportunity.

## Conclusion

The court held that a partner remains a fiduciary during dissolution and must not divert the partnership’s primary contract for personal gain; when such conduct devalues the partnership during winding up, the partner must account for the resulting loss in value.


Monin v. Monin, 785 S.W.2d 499 (Ky. Ct. App. 1989)