## Facts

- Two brothers, Rudy Corrales and Richard Corrales, formed RC Electronics (RCE) in 1989 under a written partnership agreement of indefinite duration to repair, refurbish, and sell computer tape drives.
- The partners divided roles: Rudy ran day-to-day operations; Richard supplied financing and business know-how.
- Rudy’s wife, Pamela, served as office manager and prepared business records; the couple’s daughters worked for RCE.
- RCE was successful for several years, generating substantial sums for both partners.
- Around 2004, Richard learned Rudy, Pamela, and their daughters had formed PK Electronics (PKE), a competing business performing the same services without Richard.
- When questioned, Rudy refused to provide information about PKE and cut off communication with Richard.
- On April 12, 2005, Richard sent Rudy a written “Notice of Dissociation,” stating he was withdrawing from the partnership.
- The parties sued each other; Richard alleged, among other claims, that Rudy breached the partner duty of loyalty by secretly operating and diverting business to PKE.
- At trial, the court found key witnesses not credible and described the partnership records as poorly maintained and lacking reliable corroboration.

## Issues

1. Under California’s Revised Uniform Partnership Act (RUPA), can a two-person partnership continue as a “one-person partnership” after one partner withdraws?
2. If a one-person partnership cannot exist, did the trial court apply an incorrect remedial framework by treating the withdrawal as dissociation with a continuing-entity buyout rather than dissolution and winding up?

## Decision

- The Court of Appeal held that a partnership cannot exist with only one partner under RUPA.
- The court ruled that when a partnership has only two partners, the departure of one causes dissolution by operation of law.
- Because the case was largely tried on the erroneous premise that the business continued as a partnership with Rudy as the only partner, the court reversed the monetary portion of the judgment.
- The court remanded for application of the correct dissolution and winding up procedures and recalculation of the parties’ financial rights under that framework.

## Legal Principles

- Under California’s RUPA, a partnership requires an association of two or more persons; there is no legally cognizable one-partner partnership.
- In a two-person partnership, a partner’s withdrawal triggers dissolution by operation of law rather than mere dissociation with continuation of the partnership.
- Dissociation-based buyout mechanisms presuppose a continuing multi-person partnership and are inapplicable where the partnership cannot continue due to the loss of the second partner.
- Monetary relief premised on valuation of a dissociated partner’s interest in a continuing partnership must be set aside when dissolution and winding up is the proper statutory route.

## Conclusion

The court required dissolution and winding up when one of two partners withdrew, rejecting a continuing “one-person partnership” theory and reversing monetary awards that were calculated under an improper dissociation-and-buyout model.


Corrales v. Corrales, 198 Cal. App. 4th 221 (Cal. Ct. App. 2011)