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What would happen in the case of a general partnership where 5 people put some money together to buy a house for $1M: Partner 1: $500,000 Partner 2: $250,000
by Canada 4y ago
What would happen in the case of a general partnership where 5 people put some money together to buy a house for $1M:
Partner 1: $500,000
Partner 2: $250,000
Partner 3: $249,000
Partner 4: $999
Partner 5: $1
They issued paper receipts representing these proportions. All agreed that any rent collected would be paid to the paper holders Pro rata. All parties have to show up to review/approve/reject a tenant, and all have to show up to collect the rent on the due day. Each person writes their own receipts and signs all the others, so no one party is more in charge than any other. Partner 3 sells 100,000 receipts to someone else, we'll call Person A, for $101,000. Then the house burns down and is lost, so there's not going to be any rental income now and nobody is interested in buying the receipts anymore. None of the parties did anything to cause the fire.
Now who can sue successfully?
(Not saying the facts of the case in the article match my hypothetical exactly.)
- vkou 4y ago> Now who can sue successfully? Nobody? All I see is six morons that have joint ownership in a house that were all too cheap to pay for insurance. And since nobody's at fault for the fire, tough cheese. Person A might be able to sue whomever sold him the receipts, but only if he was lied to about how the organization functions.
- deleted 4y ago[deleted]
- gamblor956 4y agoThis is a pretty standard partnership issue. In your scenario, nobody's at fault for anything, so nobody can sue anybody. But what if Partner 2 set fire to the house? Then the other Partners (now including Person A but not Partner 3) could sue Partner 2 for losses. Or what if Person B, a tenant, suffered harm due to negligent maintenance of the house? Person B could sue any or all of the Partners (now including Person A but not Partner 3) for damages. And each partner would be "jointly and severally" liable for all of Person B's damages (so if Partner 5, owning a tiny portion of the partnership ended up getting sued and owing damages to Person B, they would need to sue the other partners for reimbursement). But note that Partner 3 selling his partnership interest to Person A would, in many states, trigger the dissolution of the original partnership. In this case, it doesn't matter since they never bothered to form any custom organization documents or financial allocations.