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Law School Case Brief

SHAMLOO v. LADD - B154201, 2003 Cal. App. Unpub. LEXIS 288 (Jan. 9, 2003)

Rule:

A partner contributing only services is ordinarily not entitled to a share of capital on dissolution.

Facts:

Plaintiff Shamloo filed a complaint for dissolution of partnership for breach of partnership agreement. The partnership was engaged in manufacturing. The parties did not complete the formalities to do business under a corporation (Ginnytex). It operated under an oral partnership agreement. Defendant Ladd contributed $75,000 as a capital investment to the partnership and another $75,000 in the form of an interest free loan. Mr. Shamloo contributed in the form of labor, knowledge, and expertise in the industry. The trial court awarded compensation to plaintiff in the amount of $27,344 as compensation for his services to the firm.

Issue:

Was the evidence legally sufficient to support a judgment in favor of plaintiff Shamloo?

Answer:

No

Conclusion:

The evidence established that the parties initially agreed to form a corporation but failed to comply with the requisite procedures to incorporate. It was undisputed that, as a result of the failure to incorporate, Ginnytex was a de facto partnership, which is governed by the applicable version of the California Uniform Partnership Act. The rule is that, absent an agreement, a partner is not entitled to compensation for rendering services for the partnership other than profits. There is no substantial evidence that the 1995 agreement between the parties contemplated, much less resolved, the issue of whether Mr. Shamloo was to be compensated upon dissolution of the partnership for his contribution of services to the enterprise in lieu of an actual capital contribution.

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