Tuesday, April 19, 2016

Court Finds There Not To Have Been A Debtor-Creditor Relationship, But Rather a Partnership

Court Finds There Not To Have Been A Debtor-Creditor Relationship,
But Rather a Partnership

      In a recent decision from the Bankruptcy Court for the Western District of Kentucky, it was held that claims of an alleged creditor arose not from a debtor-creditor relationship, but rather from a partnership between the alleged creditor and the debtor in bankruptcy. On that basis, the claims were rejected. In re: Mik, Case No. 15-31285(1)(13), 2016 WL 889631 (Bankr. W.D. Ky. March 8, 2016).
      Paul and Lee Ann Mik were debtors in bankruptcy under Chapter 13. They listed, as a creditor holding a nonpriority claim, an unspecified obligation to William Richards. Richards will ultimately file a claim for $127,125, identified those as “money loaned on various dates.” Mik would in turn object to that claim, asserting rather that Richard has from time to time purchase items from Mik and his auctioneer business and that the various amounts transferred from Richards to Mik were for items actually purchased.
      Rejecting the notion that these amounts represented a loan, and noting concerns that some of the documentation had been manipulated, the court observed that:
The state of the documentation between Mik and Creditor is disorganized and un-probative to say the least. If this had been a bona fide loan transaction for the sums claimed by the Creditor it was incumbent upon him to make sure the documents supporting his claim to repayment. They simply do not.
      From there the court analyzed the nature of the relationship between the parties and determined that it satisfied that of a partnership, the court referencing KRS § 362.150 and case law that arose thereunder. On that basis, all Richards’ claims against Mik were rejected.
      I do not have any criticism of the conclusion here reached, but I must question why the court cited KRS § 362.150. It is stated otherwise in the opinion that the auction business in which it was determined Richards and Mik were partners was organized in December, 2012. In consequence, this partnership was governed by the Kentucky Revised Uniform Partnership Act (2006). While the Uniform Partnership Act and the Revised Uniform Partnership Act (2006) will almost always come to the same conclusion as to whether a partnership existed, it would have been nice to cite the correct controlling statute.

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