## Facts

- A general partnership was formed to acquire, develop, and manage commercial real property; by 1993, Daniel A. Casey held 40% and James D. Chapman held 20%.
- In 1993, Casey agreed in writing to buy Chapman’s “entire Partnership Interest” for $200,000; the partners signed to acknowledge Chapman’s withdrawal as of the closing.
- Casey paid $15,000 down and executed a nonrecourse promissory note for $185,000 to Chapman.
- Casey simultaneously granted Chapman a security interest in the partnership interest being sold; the security agreement provided acceleration and foreclosure upon default.
- Casey defaulted in 1995; Chapman initiated foreclosure, which Casey initially enjoined.
- The parties settled: Casey received additional time to pay and agreed that, upon a renewed default, the pledged interest would be sold at a UCC foreclosure sale on a specified future date.
- Casey defaulted again; in 1999, the partnership interest was sold at a UCC foreclosure sale to Bruno Investments, L.L.C. for $200,000 (equal to the debt).
- Chapman filed a declaratory-judgment action seeking confirmation of the sale and a declaration of what rights Bruno acquired.
- The trial court confirmed the sale as commercially reasonable and ruled that Bruno acquired all rights in the interest, including voting and management rights; Casey appealed.

## Issues

1. Whether a purchaser at a UCC foreclosure sale of a partner’s “partnership interest” acquires only assignable economic rights or also management and voting rights.
2. Whether the UCC foreclosure sale was commercially reasonable when the court confirmed the sale without imposing an upset price.
3. Whether Chapman had standing to seek declaratory relief concerning the sale’s validity and the purchaser’s resulting rights.

## Decision

- The court affirmed confirmation of the foreclosure sale and the ruling that the disposition was commercially reasonable.
- The court reversed the declaration that the foreclosure purchaser acquired management and voting rights.
- The court held that the foreclosure purchaser acquired only the right to receive profits allocable to the partnership interest, not governance rights.
- The court rejected the argument that commercial reasonableness required an upset price, treating that decision as discretionary.
- The court concluded Chapman had standing because the requested declaration affected his legal and financial interests arising from the secured transaction and settlement.

## Legal Principles

- Under Washington partnership law, assignment of a partnership interest generally transfers only economic rights (profits and distributions) unless all partners agree to confer additional rights.
- A secured creditor foreclosing on a partnership interest can sell only what the debtor owned and could convey; a UCC disposition cannot transfer governance rights absent the required partner consent.
- Under UCC Article 9, every aspect of a collateral disposition must be commercially reasonable; the absence of an upset price does not, by itself, make a sale commercially unreasonable.
- A court’s decision to require an upset price as a condition of confirming a sale is discretionary, and the challenger bears the burden to show commercial unreasonableness.
- Declaratory relief is available when the plaintiff’s rights or obligations will be affected by the court’s declaration, supporting standing.

## Conclusion

The appellate court held that a UCC foreclosure sale of a pledged general partnership interest transferred only the assignable economic component (profits/distributions) and not management or voting rights absent unanimous partner consent, while also upholding the sale as commercially reasonable despite the trial court’s refusal to set an upset price.


Casey v. Chapman, 123 Wn. App. 670, 98 P.3d 1246 (Wash. Ct. App. 2004)