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Kovacik v. Reed - 49 Cal. 2d 166, 315 P.2d 314 (1957)

Rule:

The law presumes that partners and joint adventurers intended to participate equally in the profits and losses of the common enterprise, irrespective of any inequality in the amounts each contributed to the capital employed in the venture, with the losses being shared by them in the same proportions as they share the profits. Where one contributes the money capital as against the other's skill and labor, neither party is liable to the other for contribution for any loss sustained. Thus, upon loss of the money the party who contributed it is not entitled to recover any part of it from the party who contributed only services.

Facts:

Kovacik told Reed that Kovacik had an opportunity to do kitchen remodeling work for Sears Roebuck Company in San Francisco and asked Reed to become his job superintendent and estimator in this venture. Kovacik said that he had about $10,000.00 to invest in the venture and that, if Reed would superintend and estimate the jobs, Kovacik would share the profits with Reed on a 50-50 basis. Kovacik did not ask Reed to agree to share any loss that might result and Reed did not offer to share any such loss. The subject of a possible loss was not discussed in the inception of this venture. Reed accepted Kovacik's proposal and commenced work for the venture. Reed's only contribution was his own labor. Kovacik provided all of the venture's financing through the credit of Asbestos Siding Company, although at times Reed purchased materials for the jobs in his own name or on his account for which he was reimbursed. In this suit for dissolution of a joint venture and for an accounting,

Reed appealed from a judgment of the Superior Court of the City and County of San Francisco (California), which ruled that Kovacik was to recover from Reed one half of the losses of the venture.

Issue:

Did the lower court err in awarding half of joint venture's financial losses to Kovacik?

Answer:

Yes

Conclusion:

The Court concluded that inasmuch as the parties agreed that the financial partner was to supply the money and the labor partner the actual work required to carry on the venture, the labor partner was correct in his contention that the trial court erred in holding him liable for one half the monetary losses. The financial partner lost only some $ 8,680 - or somewhat less than the $ 10,000 that he originally proposed and agreed to invest. The Court concluded that the evidence to support the essential findings and conclusions had to be found in the settled statement, or the judgment must fall. It followed that the conclusion of law upon which the judgment in favor of the financial partner for recovery from the labor partner of one half the monetary losses was untenable, and that the judgment should be reversed.

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