Legal Question in Business Law in California

You should immediately and in writing notify the bank that, without admiting responsibility for any of the $45,000 in currently due charges, you will not be liable for any future charges. You should also demand copies of all statements and other documents and agreements relating to the account. If there were any other "joint" accounts you should do the same with respect to them. Finally, you should demand, again in writing, that your former partner cease using the account in question and any similar accounts that may still exist.

At the end of the day, depending on what your agreements with the bank were and what arguments can be made to limit your liability, you may be on the hook to the bank even though you would have a claim against your former partner.

IMPORTANT NOTICE: The above response is not intended to, and does not, create an attorney-client, fiduciary or other confidential relationship with the responder. Neither does it constitute the providing of legal advice or services or the giving of a legal opinion by the responder. Such a relationship can only be created, and legal advice and/or legal services provided, pursuant to a written agreement with the responder. Accordingly, no obligations of any kind are assumed with respect to any matter or question presented. It should also be noted that legal issues are often time sensitive and legal rights may be lost or compromised if you do not act in a timely fashion.

In addition to the other comment by Mr. Reich, which are excellent, I don't understand how you let things go this long with your partner. From what you've said, it doesn't appear you have taken any steps to dissolve the partnership, notify creditors, etc. You mentioned trusting your partner, which is one thing. I guess you didn't follow former President Regan's oft quoted statement "Trust . . . but verify."

Please consult with a local attorney as soon as possible.

Kevin B. Murphy, B.S., M.B.A., J.D. - Mr. Franchise

Franchise Attorney

When a general partner ceases to be a general partner, an Amendment to Certificate of Limited Partnership (Sec of State Form LP-2) should be filed with the Sec of State. From your question it appears this did not happen. As a result, as a general partner you may be liable for up to two years after the dissociation if the third party did not have notice of the dissociation and reasonably believes that the dissociated partner was still a general partner. Corporations Code Section 15906.07(c).

(c) A person that has dissociated as a general partner but whose

dissociation did not result in a dissolution and winding up of the

limited partnership's activities is liable on a transaction entered

into by the limited partnership after the dissociation only if:

(1) a general partner would be liable on the transaction; and

(2) at the time the other party enters into the transaction:

(A) less than two years have passed since the dissociation; and

(B) the other party does not have notice of the dissociation and

reasonably believes that the person is a general partner.

Notice the two year period. From your question it appears that this has gone on for 15 years. As a result, I would suggest that you may only be liable for the debt incurred for the two years after you dissociated.

As a practical matter, I suggest you employ an attorney to demand the bank recognize this statutory protection, demand an accounting of the credit card to determine your two year financial liability and absolve you of the remaining balance.

If you would like more information, please feel free to contact me.

Regards,

Bryan Becker

Becker Attorneys

www.bbeckerlaw.com

Mr. Becker's response deals with limited partnerships, not general partnerships. Yours was probably a general partnership. General partnerships may, but generally don't, file papers with the Secretary of State to give public notice of who is, and who isn't, a partner. For general partnerships, the public notice is accomplished through the filing of a fictitious business name statement with the county clerk.

Next, you may not get much help from the statute of limitations, as the bank can probably assert that its cause of action for the entire account is renewed with each transaction on an "open book account" theory or with each statement issued and not protested, on an "account stated" theory, either of which circumvents the four-year limitations period on a claim based on a written agreement.

Finally, I think you may still have a viable claim against your ex-partner for fraud and/or breach of fiduciary duty of a partner, because claims of this sort may not arise, and thus the limitations period may not begin to run, until the facts constituting the fraud or breach are, or could have been with reasonable diligence, discovered.

This is why people are encouraged to check their credit reports once in a while. A huge credit line like this would have been easy to spot on a typical credit report.