Crow Irvine 2 v. Winthrop Cal. Invetors Ltd. Partnership

Winthrop California Investors Limited Partnership appeals from a judgment declaring it had no basis to terminate its partnership with Crow Irvine # 2. The parties' partnership agreement provides that the partnership is subject to termination if "either partner believes in good faith that irreconcilable differences between the Partners prevent the Partnership from achieving its purposes...." Winthrop contends the trial court erred in concluding that "good faith belief must be measured by an objective standard, and in rejecting Winthrop's claim of such a belief as "unreasonable." We agree.

The phrase "good faith belief generally requires evaluation of a party's subjective state of mind, without regard to its objective reasonableness. While the reasonableness of a claimed belief may be considered in determining whether their claimed belief is honestly held, it is not a prerequisite. And, nothing in the language of this partnership agreement requires a departure from that general rule. Because the court used an incorrect standard in evaluating Winthrop's claim of good faith belief, the judgment must be reversed and the case remanded for a new evaluation of that…