Prentiss v. Sheffel

Brief Fact Summary. Defendant, Chris Prentiss, appealed the decision to allow Plaintiffs, his former partners, to successfully bid for the business after it was dissolved.

Synopsis of Rule of Law. Absent bad faith or an agreement that states otherwise, a partner may bid on the resale of the partnership.

Facts. Defendant and Plaintiffs were partners in the owning and operation of a shopping center. Defendant was unable to pay his share of the operating losses. His debt to the partnership as well as several differences between the parties led Plaintiffs to exclude Defendant from managerial activities. Plaintiffs moved for a dissolution of the partnership, and Defendant moved to appoint a receiver. The receiver liquidated the business assets, and Plaintiffs submitted the highest bid. Defendant challenged the sale of the business to Plaintiffs, claiming the repurchase was done in bad faith.

Issue. The issue is whether Plaintiffs should be allowed to successfully bid for their former business after they excluded Defendant from the management of the business.

Held. Absent bad faith or a prior agreement that states otherwise, Plaintiffs are entitled to bid on their own former assets during a judicial sale. The court referenced A.R.S. Section: 29-238 which outlined the rights of each partner after a dissolution but offered no basis for denying the partners to bid on the resale.

Discussion. Defendant could have sought damages under a breach of their partnership agreement if it was found that Plaintiffs were responsible for the wrongful dissolution of the partnership.