Joseph Guenther and Michelle Ryerson were an unmarried couple. In June 2009, they purchased land in Idaho and formed a partnership to develop it into a profitable vineyard. There was no written agreement.
While the couple did not specify the allocation of expenses, liabilities, or profit, they agreed on two things. They agreed that the partnership’s purpose was to purchase the property and develop it into a profitable vineyard. They also agreed that some of the land would house Guenther, Ryerson, and Ryerson’s two children. Guenther and Ryerson eventually took out a 30-year mortgage to finance the construction of their shared home. Construction began in August 2015, and the house was complete in January 2016. Ryerson and her two children moved in that month.
Guenther moved in May 2016.
Less than a year later, Guenther and Ryerson ended their relationship. On March 26, 2017, the couple split up and decided they could not run the partnership together.
In June 2017, Guenther filed a complaint asking for the partnership’s dissolution, among other claims. Ryerson filed an answer and counterclaim, asking for the partnership’s dissolution and a determination that she had a 50 percent ownership stake in the partnership. Both parties agreed that their breakup was a dissociative act requiring dissolution and winding up of the partnership. As the winding-up process began, Guenther asked the district court to allow him to buy out Ryerson’s interest in the property. On the other hand, Ryerson wanted the court to liquidate the partnership’s assets, including the property, by sale. After much back and forth, the district court ultimately decided, among other things, that Guenther would have the first chance to secure financing to buy out the interest. It would then fall on Ryerson to try, after which the property would be listed and sold on the open market at a fixed price.
The district court also ruled that if the property were liquidated, Guenther would receive 100 percent of any gain in equity that accrued after the date of dissolution because Ryerson had abandoned the property. Guenther would also receive 76 percent of the partnership’s remaining surplus assets based on the partners’ ratio of uncompensated capital contributions.
Neither party was able to purchase the property. Accordingly, the district court set the property to be listed and sold on the open market. However, both parties appealed. Ryerson contended that the court should not have fixed the sale price at \($725,000\) plus 6 percent or granted Guenther 100 percent of any post-dissolution increase in the property’s equity. Guenther argued the court erred in ordering the forced sale of the property, among other issues.
1. Should the property have been liquidated by sale on the open market?
2. What is the difference between dissolution and a partnership’s legal end?