Partner dissociated for filing bankruptcy? Help, please.
Posted: Thu Dec 08, 2011 3:10 pm
That raises other questions, then. If he discharges any personal liability
through the bk, does that mean he still gets his investment back? Would it
be a violation of the discharge injunction to "collect" on that debt by not
giving him back his investment? Or is it more like a setoff right?
On Thu, Dec 8, 2011 at 2:59 PM, Dennis McGoldrick wrote:
> **
>
>
> Holly:
>
> List the creditors as contingent, without a dollar amount, if you decide
> to list them.
> It is my practice to list them.
>
> You can rely on Beezley and Neilson, but that is a pain, as if the
> partnership creditors sue, you have to raise a Beezley or Neilson defense
> and the debtor will be screaming you should have listed the creditors.
>
> The limitation in the statute for liability up to the investment means the
> debtor loses his investment, not that there is additional liability.
>
> d
>
> ------------------------------
> *From:* Holly Roark
> *To:* cdcbaa@yahoogroups.com; Strictly Bankruptcy Issues BK@mail.nacba.org>
> *Sent:* Thursday, December 8, 2011 2:47 PM
>
> *Subject:* Re: [cdcbaa] Partner dissociated for filing bankruptcy? Help,
> please.
>
>
> Question now on this matter is, do I have to amend debtor's schedules
> to list the creditors of the partnership? California Limited Liability
> Partnerships are confusing. (See Title 2, article 10 of the statute here:
> http://www.leginfo.ca.gov/cgi-bin/calaw ... ectioncorp) I have
> read that a limited liability partner is "not liable" for the debts of the
> partnership, but I have also read that limited partners are "only liable up
> to the amount of their investments". If my guy invested $20K in the
> partnership and is theoreitcally liable up to that amount, and the
> partnership is in debt $100K, do I list the partnership as a creditor in
> his personal BK case, or do I list each individual creditor of the LLP, or
> neither?
>
> Here's the statute:
>
> *California CORPORATIONS CODE *
> 15903.03. (a) A limited partner is not liable for any obligation of
> a limited partnership unless named as a general partner in the
> certificate or, in addition to exercising the rights and powers of a
> limited partner, the limited partner participates in the control of
> the business. If a limited partner participates in the control of the
> business without being named as a general partner, that partner may
> be held liable as a general partner only to persons who transact
> business with the limited partnership with actual knowledge of that
> partner's participation in control and with a reasonable belief,
> based upon the limited partner's conduct, that the partner is a
> general partner at the time of the transaction. Nothing in this
> chapter shall be construed to affect the liability of a limited
> partner to third parties for the limited partner's participation in
> tortious conduct.
>
> Let's say the debtor is not a general partner, but "participates in the
> control of the business" and therefore under the statute above, is liable
> for the obligations of the partnership (up to the amount of his
> investment). Again, my question is, do I list the creditors of the
> partnership in his BK, or do I list the partnership as a creditor?
> According to the above statute, it appears that I would have to find out
> whether he held himself out to any particular creditors as a general
> partner, and then only list those creditors. Any thoughts on who/how to
> list any potential personal liability in this matter?
>
> I have to amend very soon if at all since the case is ready for discharge
> now.
>
> Holly Roark
>
>
> On Mon, Nov 28, 2011 at 3:46 PM, Holly Roark wrote:
>
> *Summit Investment Development v. Curran*, 69 F.3d 608 (1st Cir. 1995)
> holds that section 365(e) trumps the *ipso facto* termination provisions
> of a partnership agreement AND a state partnership statute. *See also In
> re Rittenhouse Carpet, Inc.*, 56 B.R. 131 (E.D. PA. 1985) (holding that
> section 365(e) prohibits the operation of state laws providing that the
> mere filing of a petition under the Code causes the immediate removal of a
> debtor/partner from a partnership.) *See also In re Safren*, 65 B.R.
> 566 (C.D. CA 1986) (holding that the filing of a bankruptcy petition
> [Chapter 11] does not dissolve a general partnership, notwithstanding the
> provision of California state law [UPA] being to the contrary.) I have not
> found 9th Cir. authority in support or contrary to the foregoing opinions,
> though *Fotouhi v. Mansdorf*, 427 B.R. 800 (N.D. CA 2010) assumes,
> without any analysis, that the debtor became dissociated from the
> partnership upon the filing of the bankruptcy petition "as a matter of
> law". In shepardizing *Summit*, I did find *In re Catapult*, 165 F.3d
> 747 (9th Cir. 1999) which states that an executory contract (assuming a
> partnership agreement is an executory contract) may not be assumed without
> consent of the partners when a partner files for bankruptcy, but that is a
> different issue from whether a partner "must" be dissociated due to the
> California statute referenced below. This case gives the partners the
> option of keeping the debtor as a partner. With respect to "assuming" such
> an executory contract, there is also case authority which states that such
> a contract "rides through" the bankruptcy and need not be assumed nor
> rejected, at least in a Chapter 11 case. *See **In re JZ, L.L.C*., 371
> B.R. 412 (9th Cir. BAP 2007).
>
> My research is ongoing, and I will update you.....
>
> Holly
>
> Debtor was just informed by his partners that he was required to be
> dissociated from their Limited Liability Partnership partnership since he
> filed a personal BK. He intends to pay his business debt and wants to stay
> in the partnership, but partners insist that by law he must be
> dissociated. The below is the code they cite to. Debtor is not happy.
> Can someone offer me some perspective on the below code? Does anyone have
> case law interpreting the below? Is there anything the debtor can do to
> stay in the partnership?
>
>
> *CORPORATIONS CODE
> SECTION 16601-16603 *
> 16601. A partner is dissociated from a partnership upon the occurrence of
> any of the following events: (1) The partnership's having notice of the
> partner's express will to withdraw as a partner or on a later date
> specified by the partner. (2) An event agreed to in the partnership
> agreement as causing the partner's dissociation. (3) The partner's
> expulsion pursuant to the partnership agreement. (4) The partner's
> expulsion by the unanimous vote of the other partners if any of the
> following apply: (A) It is unlawful to carry on the partnership business
> with that partner. (B) There has been a transfer of all or substantially
> all of that partner's transferable interest in the partnership, other than
> a transfer for security purposes, or a court order charging the partner' s
> interest, that has not been foreclosed. (C) Within 90 days after the
> partnership notifies a corporate partner that it will be expelled because
> it has filed a certificate of dissolution or the equivalent, its charter
> has been revoked, or its right to conduct business has been suspended by
> the jurisdiction of its incorporation, there is no revocation of the
> certificate of dissolution or no reinstatement of its charter or its right
> to conduct business. (D) A partnership, limited partnership, or limited
> liability company that is a partner has been dissolved and its business is
> being wound up. (5) On application by the partnership or another partner,
> the partner's expulsion by judicial determination because of any of the
> following: (A) The partner engaged in wrongful conduct that adversely and
> materially affected the partnership business. (B) The partner willfully or
> persistently committed a material breach of the partnership agreement or of
> a duty owed to the partnership or the other partners under Section 16404.
> (C) The partner engaged in conduct relating to the partnership business
> that makes it not reasonably practicable to carry on the business in
> partnership with the partner. (6) The partner's act or failure to act in
> any of the following instances: (A) By becoming a debtor in bankruptcy.
> --
> Holly Roark
> holly@roarklawoffices.com
> www.roarklawoffices.com
> Central District of California
> Consumer Bankruptcy Attorney
> 1875 Century Park East, Suite 600
> Los Angeles, CA 90067
> T (310) 553-2600
> F (310) 553-2601
>
>
>
>
>
>
Holly Roark
holly@roarklawoffices.com
www.roarklawoffices.com
Central District of California
Consumer Bankruptcy Attorney
1875 Century Park East, Suite 600
Los Angeles, CA 90067
T (310) 553-2600
F (310) 553-2601
That raises other questions, then. If he discharges any personal liability through the bk, does that mean he still gets his investment back? Would it be a violation of the discharge injunction to "collect" on that debt by not giving him back his investment? Or is it more like a setoff right?
On Thu, Dec 8, 2011 at 2:59 PM, Dennis McGoldrick <easky1@yahoo.com> wrote:
Holly:
List the creditors as contingent, without a dollar amount, if you decide to list them.
It is my practice to list them.
You can rely on Beezley and Neilson, but that is a pain, as if the partnership creditors sue, you have to raise a Beezley or Neilson defense and the debtor will be screaming you should have listed the creditors.
The limitation in the statute for liability up to the investment means the debtor loses his investment, not that there is additional liability.
d
From: Holly Roark <hollyroark22@gmail.com>To:
The post was migrated from Yahoo.