Edward Johnson and Gerald Johnson are brothers who formed an oral partnership to invest in real…
Edward Johnson and Gerald Johnson are brothers who formed an oral partnership to invest in real estate. The partnership held two condominiums, one in Fresno, California, and one in Pittsburgh, Pennsylvania. Both properties were purchased using secured financing from a bank. Unfortunately for the brothers, the partnership was not generating revenue like they had hoped.
In 2012, Gerald and his wife filed for Chapter 7 bankruptcy in Pennsylvania. Gerald stated that he intended to keep and make regular payments on the secured financing for the two properties. Gerald obtained a discharge from the bankruptcy but the properties and loan obligations on the properties were “passed-through” back to him. Subsequent to Gerald’s discharge, Edward reached a settlement with the lenders of the Fresno and Pittsburgh properties, which included a payment of $200,000 to the bank on partnership obligations. Edward also spent his own funds on the partnerships operating expenses and attorney fees.
In 2015, and following the settlement, Edward sued Gerald in an attempt to recoup some of his losses. Edward asserted five causes of action against Gerald, including damages for misrepresentations in breach of Gerald’s duty of care to the partnership during the bankruptcy proceedings, wrongful dissociation from partnership, and unjust enrichment.
Gerald moved to dismiss the case, making three arguments. Most pertinent to this chapter was Gerald’s assertion that the partnership was dissolved because of the bankruptcy so he was not liable for any partnership actions after the discharge. The crux of the case is whether Gerald and Edward still had a partnership after the bankruptcy. What did the court decide as to this matter? What was its reasoning? What is the difference between dissociation and dissolution according to the court? Edward argued that even if the partnership was dissolved after the bankruptcy, Gerald had agreed to continue the partnership. What evidence did Edward provide and how convincing do you think it is?