Placida Lendof February 23, 2020

Prof. Cohen BBA 337

Conklin Farm v. Doris Leibowitz

The Facts Of The Case

Paula Hertzberg, Joel Leibowitz and Elliot Leibowitz formed a partnership called Long View

estates in December 1986. They also decided to acquire 100 acres of land from Conklin Farm

where they intended to build a residential condominium complex on the property. The three

partners then signed a promissory note to Conklin for $9 million and they guaranteed the

payment of the note personally. The note was a portion of the purchase price for the land and

also stated the monthly payments and the interest it would accumulate over time. In March 1990

Joel Leibowitz assigned his thirty percent in Longview to his wife and on Aug 30, 1991 she

assigned it back to him. The Longview condominium project was unsuccessful and each of the

partners filed for bankruptcy and were all discharged from liability for the Conklin note.

Conking then looked to defendant Doris Leibowitz for payment of the thirty percent plus interest

that her husband had accrued. Claiming that she was personally liable for the interest that were

accrued during the seventeen months she held her husband interest.

The Issue At The Law The Court Is Considering

The issue in this case is whether an incoming partner is personally liable for the interest that

accrues on a preexisting debt while they were a partner.

How The Law Was Applied In This Case

In the first ruling of the case the trial court found that Doris Leibowitz was not personally liable

for the interests accrued and granted her motion for summary judgement. Conklin appealed. The

Appellate Division then reversed the trial court’s decision, finding that the interests in

preexisting debt is new debt and therefore Doris Leibowitz was personally liable for the interests

accrued while she was a partner at Longview. In the final ruling of the case the Court found that

the defendant was not liable and the Appellate Division’s judgement was reversed.

Conclusion Of The Court

In the last judgment of the case the courts found that Doris Leibowitz was not personally liable

for the interests in a preexisting debt because the promissory note was signed before the

defendant held her husbands’ interest. When the loan was signed Conklin considered the

personal credit of the three original partners and he did not rely on the personal credit of Doris

Leibowitz. Due to these facts the Appellate Divisions ruling was reversed.

Horizon/CMS Healthcare Corporation v. Southern Oaks Health Care Inc.

The Facts Of The Case

Horizon a provider of nursing home facilities and management of nursing homes was looking to

expand into Osceola, County in Florida but Southern Oaks was already operating there. Southern

Oaks Health Care Center had a certificate of need for a new one hundred and twenty bed facility

located in Kissimmee Florida, so Southern Oaks and Horizon proposed a partnership to own the

facility. They entered into a twenty-year partnership in 1993 and they agreed that Horizon would
manage both the Southern Oaks facility and the new facility which was renamed Royal Oaks.

Southern Oaks filed a suit in 1996 claiming that Horizon breached its obligations and several

management contracts.

The Issue At The Law The Court Is Considering

The issue in this case is whether the partnership should be dissolved and whether damages

should be recovered.

How The Law Was Applied In This Case

In the ruling of the case the trial court found that Horizon and Southern Oaks were incapable of

being in business together and ordered that the partnership be dissolved. It also ruled that there

was no entitlement to future damages. Southern Oaks crossed appealed, claiming that it should

receive a damage award for the loss of the partnerships remaining years’ worth of profits,

because horizon wrongfully sought dissolution of the partnership. The court rejected the

argument.

Conclusion Of The Court

The court found that Horizon did not act wrongfully by asking for a partnership dissolution and

that the trial court rightfully granted Horizons request to dissolve the partnership. This is because

the trial court found that the partners had irreconcilable differences and according to the RUPA a

partner can ask for judicial dissolution if it’s not reasonably practical to continue with the

partnership business. Based on these facts the court rejected Southern Oaks argument.
1. Explain the differences between UPA and RUPA in regard to:

a) Dissociation- Happens when a partner terminates their association in the carrying on

of a business. Under the UPA if a partner leaves the partnership or if the partners

agree to end the partnership dissolves and the business ends, the business wind up and

the business is sold. This process is called dissolution. While under RUPA if a

partner leaves the partnership, the partnership doesn’t dissolve, and the remaining

partners can buy the interests of the dissociating partner and continue the business.

b) Apparent Authority- Happens when a third party believes that an agent has the

authority of a principal. Under the RUPA “the partnership is bound in a transaction

not appropriate for winding up only if the partners act would have bound the

partnership before dissolution”. Under UPA apparent authority continues to unite the

partnership for acts within the scope of the business unless the third party is given

notice of the dissolution,

c) Marshalling- The process by which the court separates the partners assets and

liabilities individually. Under the RUPA and the UPA partnership creditors are

entitled to be paid first out of partnership assets. Unlike the UPA the revised act

requires that unpaid creditors may collect any deficiency from the individually owned

assets.

d) Distribution of Assets- Under UPA the assets are distributed in this order creditors,

partner creditors, capital contributions, and partners divide profits and losses. IN
 RUPA the assets are distributed to all creditors, then partner capital contributions, and

the profits and losses are then divided into partners.

2. Taking sides

a) Stroud may argue that because he informed National Biscuit that he would not be

personally responsible for any more bread delivered to the partnership. He is not

liable for any unpaid payments.

b) Because both parties are agents in the partnership both partners are jointly responsible

for the payment of the bread ordered to the partnership business.

c) In this case I believe that National Biscuits argument should prevail because both

parties are equally responsible for the payment of the bread order. Especially since

the order was connected to the partnership business.

3. Bringing a partner into the business doubles up your risk because liability for the partner

debts become unlimited, also because each partner is an agent of the partnership, they

become liable for their partners actions. For example, if a partner decided to leave the

country then that partners debts become yours. Another risk is that because both partners

have equal authority, one partner may decide on something that may affect both partners

and the business. For example, if a partner decides to do an illegal act the business may

be affected.

Page v. Page
In this case two bothers became partners for a linen supply business in 1949 and each

partner contributed approx. $43,000 for the purchase of machinery, land and linen

required to begin the business. The business was unprofitable for the first nine years

losing approximately $62,000 and it eventually started to improve in 1958. Eventually

George B. Page the plaintiff wanted to dissolve the partnership after business became

profitable. The defendant believed that plaintiff was using his superior financial position

to push him out and acquire all the profits and the business for himself. The court found

that a partnership can be dissolved by express will, however the partner could not

dissolve to take all the profits.

https://law.justia.com/cases/california/supreme-court/2d/55/192.html