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Keywords

plaintiffdefendanthearingtrialwillpartnershipbad faith
plaintiffdefendantappealtrialwillpartnershipbad faithappellantappellee

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Prentiss v. Sheffel, 20 Ariz.App. 411, 513 P.2d 949

Facts

The case arose from a partnership formed to acquire and operate the West Plaza Shopping Center in Phoenix, Arizona. The plaintiffs sought dissolution of the partnership, claiming the defendant had been derelict in his duties and failed to contribute his share of operating losses. The defendant counterclaimed for a winding up of the partnership, alleging wrongful exclusion from management. After a hearing, the trial court found that the partnership was dissolved due to the exclusion and appointed a receiver to oversee the sale of the partnership assets, which were ultimately sold to the plaintiffs.

Suit was originally brought by plaintiffs-appellees seeking dissolution of a partnership they had formed with defendant-appellant. The partnership was created for the purpose of acquiring and operating the West Plaza Shopping Center located at Bethany Home Road and 35th Avenue in Phoenix, Arizona. (Hereinafter referred to as the Center).

Issue

Whether two majority partners in a three-man partnership-at-will, who have excluded the third partner from partnership management and affairs, should be allowed to purchase the partnership assets at a judicially supervised dissolution sale.

The question presented by this appeal is whether two majority partners in a three-man partnership-at-will, who have excluded the third partner from partnership management and affairs, should be allowed to purchase the partnership assets at a judicially supervised dissolution sale.

Rule

A partnership-at-will exists between partners, and upon dissolution, partners may have the partnership property applied to discharge liabilities, with surplus applied to pay partners' interests, unless dissolution is caused wrongfully.

A partnership-at-will exists between partners, and upon dissolution, partners may have the partnership property applied to discharge liabilities, with surplus applied to pay partners' interests, unless dissolution is caused wrongfully.

Analysis

The court applied the rule by examining the circumstances of the partnership's dissolution and the exclusion of the minority partner. It found that the exclusion was not done in bad faith and that the minority partner did not demonstrate any injury from the sale. The court noted that the plaintiffs' participation in the sale actually enhanced the value of the minority partner's interest.

The record, however, does not support the defendant's position on two particulars. While the trial court did find that the defendant was excluded from the management of the partnership, there was no indication that such exclusion was done for the wrongful purpose of obtaining the partnership assets in bad faith rather than being merely the result of the inability of the partners to harmoniously function in a partnership relationship.

Conclusion

The court affirmed the trial court's decision, allowing the majority partners to purchase the partnership assets at the judicial sale, concluding that the sale was conducted properly and without injustice.

The judgment of the superior court is affirmed.

Who won?

The plaintiffs prevailed in the case because the court found that their exclusion of the minority partner was not wrongful and that their participation in the sale enhanced the value of the minority partner's interest.

The plaintiffs were the high bidders at the sale which was held in open court. Subsequently, the court entered an order confirming the sale of the Center to them.

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