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G & S Investments v. Belman

Arizona Court of Appeals, Division 2
700 P.2d 1358 (1984)


Facts

G & S Investments (plaintiff) and Thomas Nordale (defendant) were two of four partners in an enterprise to own and operate an apartment building. The partnership agreement stated that in the event of the death or disability of one of the partners, the remaining partners may continue the business, but that if the partners continued the business, they must buy out the departing partner using a formula based on the partner’s capital account and the partnership’s profits. Nordale, who lived in one of the apartments in the building, became erratic and unreliable starting in 1979. Nordale stopped going to work, he threatened the other partners, he sexually solicited an underage tenant in the apartment complex, he refused to pay rent on his apartment, he caused disturbances which led to the loss of at least one tenant, and he insisted on business decisions that caused severe economic loss to the partnership. In 1981, G & S filed suit to dissolve the partnership and buy out Nordale’s interest. The complaint filed by G & S alleged that Nordale had become incapable of performing under the partnership agreement and that his conduct made it impracticable for the other partners to carry on the partnership with him. In February 1982, Nordale passed away, and his estate continued the suit through his personal representative, Fred Belman (defendant). In June 1982, G & S filed a supplemental complaint that invoked their right under the partnership agreement to carry on the partnership and buy out Nordale's interest. Nordale's estate argued that the original filing of the complaint acted as a dissolution of the partnership that required liquidating the partnership and distributing the assets to the partners. The trial court held that G & S had the right to continue the partnership and owed Nordale's estate $4,867.57. The trial court calculated the buy-out amount based on Nordale's capital account, calculated on a cost basis. Nordale’s estate appealed, and G & S cross-appealed to recover attorney's fees.

Rule of Law

Issue

Holding and Reasoning (Howard, J.)

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