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Law School Case Brief

Holmes v. Lerner - 74 Cal. App. 4th 442, 88 Cal. Rptr. 2d 130 (1999)

Rule:

The rules to establish the existence of a partnership in Cal. Corp. Code § 15007 should be viewed in the light of the crucial factor of the intent of the parties revealed in the terms of their agreement, conduct, and the surrounding circumstances when determining whether a partnership exists. 

Facts:

Plaintiff Patricia Holmes, who was a party to a partnership agreement with defendants Sandra Kruger Lerner and David Soward, brought an action in California state court against defendants, alleging that defendants breached an oral partnership agreement with plaintiff concerning the creation of a cosmetics company and that a third individual interfered with the contract, resulting in plaintiff's ouster from the business. The trial court entered judgment finding defendants liable to plaintiff for compensatory and punitive damages and granted a non-suit on various causes of action against the second defendant. Defendants appealed arguing that there was no partnership. 

Issue:

Was there a partnership in existence?

Answer:

Yes.

Conclusion:

The appellate court held that the trial court properly determined that a partnership had been formed, notwithstanding the absence of an express agreement to share profits. The court noted that an agreement to divide profits was not a prerequisite to prove the existence of a partnership. Instead, profit sharing was prima facie evidence of being a partner, rather than a required element of the definition of a partnership. The court further held that the oral partnership agreement was sufficiently definite for enforcement. The court, however, reversed the judgment of a co-defendant for contract interference because the finding that he interfered with the contract was precluded by the jury's finding that defendant never intended to perform and reversed an order granting a non-suit on claims against the co-defendant for aiding, abetting and conspiracy related to fraud, and fiduciary duty breach.

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