Rsm225 Case Memo: Howard Wolowitzz & 2. Rajesh Koothrappalii

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MEMORANDUM

THE PARTIES:
1.Howard Wolowitzz: eighty-seven years old, was an excellent engineer. He was a retired soldier who had served with the Canadian Army. He worked in Ontario later, and became a realtor and a developer of lands. 2.Rajesh Koothrappalii: fifty-five years old, was a chartered accountant. He has abundant experiences and background knowledge about the hotel businesses.

ABSTRACT:
Howard Wolowitzz and Rajesh Koothrappalii first met in 2000. From then on, Wolowitzz and Koothrappali decided to begin investing in the hotel businesses to make profits under the suggestion of Koothrappalii as Koothrappalii was very familiar with the hotel industry. Through several investments on the similar projects, Howard Wolowitzz fundamentally believed that he and Rajesh Koothrappalii had been into a “partnership” when conducting business activities. After Koothrappalii personally made some investments without Wolowitzz, Wolowitzz thought that he was “betrayed” by Koothrappalii and should be compensated by a portion of earnings from Koothrappalii since Koothrappalii violated the “fiduciary duties” towards his “partner” to make a “secret profit.”

ANALYSIS:
2001-2003: Invested in North Etobicoke
In 2001, Howard Wolowitzz and Rajesh Koothrappalii invested one hundred thousand Canadian dollars each in a company in north Etobicoke which is an electoral district in Ontario, and both became the shareholders of the company. After the subdivision of the company was sold in 2003, Howard Wolowitzz and Rajesh Koothrappalii received five hundred thousand Canadian dollars respectively. In this situation, Howard Wolowitzz and Rajesh Koothrappalii are not in a partnership, but both are the equal shareholders of the same company.

First of all, they never conduct a written or oral agreement that ensures their partnership in doing any kinds of business. Moreover, according to the Partnership Act., the partnership means two or more people running a common business and having the aim of earning profit are in a relationship called partnership. The partners in the partnership have to share the same venture and profit in business which they are carrying on. Each partner is fully liable for the debt of the firm in their partnership, and general partners should get actively involved in the management of the business. However, in terms of the definition of the partnership entity, Howard Wolowitzz and Rajesh Koothrappalii did not carry on the same business and not be fully liable for the debt of the firm they invested. Instead, they are the shareholders with limited liabilities, and they do not have authorities to make any decisions in management while investing in business. Additionally, they do not share the profit earned in real. The profit they earned is based on their personal investment rather than the shared one. Therefore, at that time, Howard Wolowitzz and Rajesh Koothrappalii were two persons who individually invested in the same firm and obtained their own profit under the suggestion of Koothrappalii.

2004-2006: Invested in Mr. Sport Hotel
In June 2004, Rajesh Koothrappalii advised again that he and Howard Wolowitzz invested in the same hotel near Niagara Fall, called the Mr. Sport Hotel. This time they invested and became the shareholders of the Mr. Sport Hotel. Differently, Rajesh Koothrappalii, who was based on his excellent experience and knowledge about the hotel industry, involved in the management and arrangement of the hotel. As a “manager,” Koothrappalii was remunerated by an amount of ten thousand Canadian dollars per month. Until the early 2006, the Mr. Sport Hotel was sold. Meanwhile, Howard Wolowitzz and Rajesh Koothrappalii received one million Canadian dollars respectively from their shares through the sales of the hotel. Although Rajesh Koothrappalii participated into the management of the hotel and also invested his capital to the hotel, he and Howard Wolowitzz were still not in a partnership under...
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