Facts
- Bernard Feinstein successfully bid at a Missouri State Highway Commission auction to buy seven tracts of land in Jefferson County for $568,703.25 and paid a 10% deposit.
- Soon after the auction, Feinstein, Howard C. Ohlendorf, and Fred Whaley agreed to form a partnership to line up purchasers (including themselves) so that, at closing, the partnership could immediately resell the tracts at a profit.
- The parties executed a written “notice of assignment” reflecting their arrangement, and Ohlendorf later recorded it.
- Ohlendorf and Whaley each paid Feinstein $18,956.77 toward the venture, acquiring equal shares with Feinstein in the partnership’s expenses and profits.
- As part of the deal, Ohlendorf agreed to buy one parcel—Tract 3—for $150,000.
- The partnership sold three of the tracts to third-party buyers, but three tracts remained unsold.
- By August 1974, Ohlendorf stated the partnership was “dead” as to him, refused to purchase Tract 3, and told the Highway Commission that the partnership would not complete the overall purchase.
- Ohlendorf sued Feinstein and Whaley to recover the money he had contributed to the partnership.
- Feinstein and Whaley filed a cross-claim seeking to wind up the partnership and recover damages, including lost profits they claimed were caused by Ohlendorf’s wrongful breach.
- After a bench trial, the trial court dissolved the partnership, denied Ohlendorf’s claim for return of his contribution, and awarded Feinstein and Whaley damages for lost profits.
- Ohlendorf appealed, challenging the sufficiency of the lost-profit evidence and arguing Feinstein and Whaley could have avoided any profit loss by continuing the venture without him.
Issues
- Whether Feinstein and Whaley proved lost-profit damages from Ohlendorf’s wrongful dissolution with sufficient certainty and competent evidence to support the trial court’s award.
- Whether, after a wrongful dissolution, the innocent partners’ choice to wind up and seek damages can be defeated on the theory that they should have continued the business to avoid or reduce lost profits.
Decision
- The court agreed that Ohlendorf wrongfully breached the partnership agreement and caused dissolution.
- The court reversed the lost-profit award because the evidence did not establish lost profits with the required certainty and was too speculative to support the damages entered.
- The court rejected Ohlendorf’s argument that Feinstein and Whaley should have continued the partnership to avoid lost profits, holding that the innocent partners have a statutory right to elect winding up and pursue damages.
- The case was reversed and remanded for further proceedings consistent with the appellate court’s rulings on damages and winding up.
Legal Principles
- A partner’s repudiation of agreed performance (including refusing an agreed buy-in purchase and terminating the venture) can constitute wrongful dissolution.
- Under Missouri’s partnership statutes (based on the Uniform Partnership Act), when dissolution is caused by a partner’s wrongful conduct, the nonbreaching partners may elect to wind up the partnership business and pursue damages for breach.
- The wrongfully dissolving partner cannot avoid liability by arguing that the innocent partners should have chosen the alternative statutory option of continuing the business; the innocent partners’ right to terminate and seek damages is not conditioned on continuing operations.
- Lost profits are recoverable only if proved with reasonable certainty; damages cannot rest on conjecture or speculative projections about resale values or offers.
- When the proof of lost profits is insufficient, an award for those profits must be reversed even if liability for wrongful dissolution is clear.
Conclusion
The Missouri Court of Appeals held that Ohlendorf wrongfully dissolved the land-resale partnership, but it reversed the trial court’s lost-profit award because Feinstein and Whaley failed to prove lost profits with adequate certainty; it also held that Ohlendorf could not defeat their damages claim by arguing they should have continued the business rather than winding up, and it remanded for further proceedings.