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Owen v. Cohen

Supreme Court of California · 1941 · Corporations
19 Cal. 2d 147 (1941)
Updated
CorporationsPartnership dissolutionPartnership at willJudicial dissolutionEquitypartnershipdissolutionCivil Code section 2426

Facts

Plaintiff and defendant orally agreed to operate a bowling-alley business as partners, and plaintiff advanced $6,986.63 to the partnership to be repaid out of profits as soon as reasonably possible. Although the business operated at a profit for about three and one-half months, the partners soon developed serious disagreements over management, policy, compensation, and money matters. The record indicated defendant sought to dominate the enterprise, humiliate plaintiff, refused substantial work, and appropriated small partnership sums without plaintiff's knowledge or consent. A receiver was appointed after plaintiff filed this action for dissolution.

Issue

Whether the evidence supported a decree dissolving the partnership and ordering sale of the assets, despite the trial court's erroneous finding that the partnership was at will. Also, whether the court properly directed payment of plaintiff's loan from sale proceeds, allowed bidding by credit at the receiver's sale, and awarded plaintiff costs.

Rule

Where partners intended that partnership obligations, including a partner's advance, would be paid from business profits, the partnership is not one at will merely because no express term was fixed; it is presumed to continue until those obligations are liquidated in the contemplated manner. Nevertheless, a court may decree dissolution under Civil Code section 2426 when a partner's prejudicial conduct, persistent breach of the agreement, or other equitable circumstances make it not reasonably practicable to carry on the business in partnership with him.

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Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.
In Portland, Maya Torres and Evan Brooks orally form a two-person bicycle-rental partnership. They set no calendar end date, but agree Maya's $40,000 advance to the firm and a startup equipment note will be repaid from business profits as soon as reasonably possible.

Six weeks later, before any serious conflict arises, Evan claims the partnership is at will and may be dissolved immediately at either partner's election solely because no express term was stated. Which is the best analysis?

Explanation. The majority rule is that where partners agree partnership obligations, including a partner's advance, will be paid from profits, the absence of an express duration does not make the partnership at will. The law presumes the parties intended the relationship to continue until those obligations were liquidated in the contemplated way.