MacArthur Co. v. Stein - 282 Mont. 85, 934 P.2d 214 (1997)

Rule:

The elements for the determination of the existence of a partnership are: (1) the parties must clearly manifest their intent to associate themselves as a partnership; (2) each party must contribute something that promotes the enterprise; (3) each party must have a right of mutual control over the subject matter of the enterprise; and (4) the parties must agree to share the profits of the enterprise. Each of the four requirements must be established in order to prove the existence of a partnership.

Facts:

Karl Stein, Jesse Beebe, and John L. Potter entered into an agreement to create a new entity which would operate under the name of Midland Roofing and Gutters. In 1991, Beebe arranged a line of credit for Midland Roofing and Gutters from MacArthur Company. Stein had previously been denied credit by the company. On the credit application, Beebe listed Midland Roofing and Gutters as the company seeking credit, and named himself as the “principal or officer.” Neither Stein nor Midland Roofing was mentioned on the credit application, and MacArthur was not advised of Stein's association with Midland Roofing and Gutters. Based solely on Beebe's credit references, MacArthur granted Midland Roofing and Gutters a line of credit and supplied the company with materials from August 1991 through January 1992. In January 1992, Jesse Beebe and John Potter departed the Billings area without notice, and left an unpaid balance to MacArthur Company in the amount of $ 39,875.27. Consequently, MacArthur Company filed a complaint against Karl Stein, Midland Roofing, Midland Roofing and Gutters, and John Does 1 and 2. MacArthur alleged that each of the defendants, as partners in Midland Roofing and Gutters, was jointly and severally liable for the outstanding debt to MacArthur. The district court concluded that Stein was a partner of Midland Roofing and Gutters at the time the debt to MacArthur was incurred. Pursuant to § 35-10-307, MCA, the district court held that Stein was jointly liable for all debts and obligations of the partnership. Stein appealed. 

Issue:

Was Stein a partner liable for the partnership’s debt to the creditor? 

Answer:

Yes.

Conclusion:

The court noted that the elements for the determination of the existence of a partnership were: (1) the parties must clearly manifest their intent to associate themselves as a partnership; (2) each party must contribute something that promotes the enterprise; (3) each party must have a right of mutual control over the subject matter of the enterprise; and (4) the parties must agree to share the profits of the enterprise. In this case, the court held that the trial court did not err when it concluded that Stein was a partner and was therefore liable for the partnership's debt to the creditor. The court found that the trial court's finding that the element of contribution had been established was supported by substantial, credible evidence and was not clearly erroneous. The court further held that the trial court's finding of Stein’s mutual control and joint proprietary interest was supported by substantial credible evidence and was not clearly erroneous. Accordingly, the court held that the trial court's findings regarding the establishment of the four elements of a partnership was proper and thus a partnership was created.