Legal Question in Business Law in California

Re: Improper Dissolution of General Partnership?

Your question covers a lot of territory. Let me give you a few highlights.

First, much depends upon your partnership agreement. Between partners, the law permits wide latitude in granting or assigning authority. Whether the new bank account and diversion of funds was a breach of fiduciary duty could depend upon (1) the partner's authority per agreement; and/or (2) the partner's intent. If the partner lacked authority or intended to convert the funds to his own use, that is a breach of fiduciary duty as well as conversion and perhaps the crime of embezzlement. The name of the new account would be probative of intent -- was it in his name, or the partnership's?

Generally, as you may know, any general partner can withdraw and trigger a dissolution of the partnership. However, a withdrawal (legally, a 'dissociation') may be either rightful or wrongful. If the partnership is a relatively recent California partnership it is probably governed by the California Uniform Partnership Act of 1994. See Corporations Code section 16601 through 16603 re dissociation generally.

What do you mean by purchase agreement? Did the two of you purchase a going business? When one of two persons forming a business hires the lawyer who prepares the purchase, incorporation, partnership, etc. papers, that is not a conflict at the get-go, but has the seeds of potential future conflict, and in larger business formation deals usually each major player is represetned separately. In small companies, one attorney is the norm but that attorney may have to choose sides or withdraw completely later on if conflicts develope among the co-promoters.

In any case, the attorney is now clearly not able to represent YOUR interests, and you need your own counsel.

In a dissolution, a partner who has committed wrongs usually forfeits his right to participate in the wind-up of its affairs.

The bank might be liable for negligence, but that would have to be researched.....it depends upon whether they breached regulations and normal standards of care in accepting the new account and processing checks as were presented.

Consider this as a strong civil case on several grounds and also a matter perhaps warranting a criminal investigation by the police or DA.

Re: Improper Dissolution of General Partnership?

Without looking at your partnership agreement..and what kind of account you have with your bank...it is hard to advise you. Other than what Mr. Whipple said...I think you should retain your attorney and put some pressure on the Bank as well.... unless you clear cut gave your partner an authority to do this.