## Facts

- Three individuals formed an oral partnership to acquire and operate a Phoenix shopping center.
- Ownership interests were 85% collectively for two partners and 15% for the third partner.
- The agreement set no fixed term and lacked detailed management provisions, making the enterprise a partnership at will.
- Relations deteriorated; the majority partners claimed the minority partner failed to perform partnership duties and did not pay a claimed share of operating losses.
- The majority partners excluded the minority partner from participation in management and partnership affairs.
- The majority partners sued for dissolution and sought to continue the business with a court-determined buyout of the minority interest.
- The minority partner counterclaimed, alleging wrongful exclusion and seeking winding up and appointment of a receiver.
- After an evidentiary hearing, the trial court appointed a receiver and ordered a judicial sale of the partnership’s principal asset.
- At the court-supervised sale, the majority partners were allowed to bid, submitted the highest bid, and the trial court confirmed the sale to them.
- The minority partner appealed, arguing the majority partners should have been barred from purchasing because they had excluded him from management.

## Issues

1. Whether majority partners who excluded a minority partner from management may bid for and purchase partnership assets at a judicially supervised dissolution sale.
2. Whether applicable dissolution statutes or fiduciary-duty principles impose a per se bar on partner-bidders under these circumstances.
3. What showing (bad faith, unfairness, or injury) is required to invalidate or prevent such a purchase.

## Decision

- The appellate court affirmed the order confirming the judicial sale to the majority partners.
- It held that, on these facts, the majority partners could properly purchase the partnership assets at the court-supervised dissolution sale.
- The court rejected a categorical prohibition on partner-bidding and required a showing of wrongful purpose, fraud, or unfairness causing injury.
- It concluded the minority partner did not establish bad faith in the exclusion or that the sale process produced actual injury to him.
- It noted that statutory dissolution provisions did not themselves bar partners from bidding at a judicial sale.

## Legal Principles

- In a partnership at will, partners may seek dissolution absent a contractual limitation; disputes about wrongful dissolution generally sound in damages rather than automatic invalidation of a judicial sale.
- A partner is not categorically disqualified from bidding on partnership assets at a fair, public, judicially supervised dissolution sale.
- Fiduciary obligations constrain partner conduct; a purchase may be set aside or restricted upon proof of fraud, overreaching, wrongful purpose, or other inequitable conduct.
- Judicial supervision (including a receiver and court confirmation) supports the validity of the sale where the record shows no price manipulation or deterrence of bidders.
- A party challenging a dissolution sale must show bad faith or unfairness and resulting injury; exclusion from management alone does not establish that the sale was inequitable.

## Conclusion

The court upheld the confirmed dissolution sale to the majority partners, holding that partners—including those who excluded a minority partner from management—may purchase partnership assets at a court-supervised sale absent proof of bad faith, fraud, or unfairness producing actual injury, with wrongful conduct addressed primarily through damages rather than a per se bidding bar.


Prentiss v. Sheffel, 20 Ariz. App. 411, 513 P.2d 949 (Ct. App. 1973)