Parker v. Northern Mixing Company

Supreme Court of Alaska · 1988 · Corporations

756 P.2d 881 (1988)

Updated August 22, 2026

CorporationsPartnershipsDissolutionAccountingPrejudgment InterestFiduciary Dutyde facto partnershipcreditor vs partner

Facts

Douglas Guthrie, Daniel Mark Parker III (Ike), and C.J. Guthrie agreed in 1984 to acquire and operate an asphalt plant, intending eventually to run the enterprise as a corporation, but no stock was ever issued and the plant operated only about two months. C.J. furnished start-up capital for Northern Mixing Company, while Douglas and Ike were to run the business; after the relationship collapsed, the parties disputed whether C.J. was a partner or creditor, whether Douglas's services counted as a contribution, and how assets and liabilities should be allocated. PPC, Ike's company, owed NMC $92,320 for asphalt it received, and both sides contested numerous expense items in the final accounting. The superior court found NMC was a de facto partnership between Ike and Douglas, C.J. was a creditor, and partnership assets were insufficient to repay all capital contributions.

Issue

Whether the superior court correctly treated C.J. as a creditor rather than a partner, properly credited Douglas for services, properly awarded prejudgment interest on PPC's debt to NMC, and correctly allocated partnership losses in the final accounting. The cross-appeal also questioned denial of rental-value damages, several accounting items, C.J.'s claim to interest on advances, and alleged breaches of fiduciary duty.

Rule

Sharing gross returns does not by itself establish a partnership, and a person advancing money is ordinarily a creditor rather than a partner when repayment is expected in any event, the person is not liable for losses, and the person does not manage or control the business. Under AS 32.05.130(1), absent contrary agreement, partners share losses according to their share in profits; partners are not entitled to remuneration for ordinary partnership services without agreement, though services may qualify as capital contributions if an express or implied agreement so provides. Prejudgment interest is awarded to compensate for loss of use of money from the date it was due, and a partner's later right to return of capital does not offset an earlier debt owed to the partnership.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Boise, Nora Kim and Elias Trent agreed to start a small concrete-recycling operation. Nora's uncle, Victor Lamm, advanced $150,000 so the business could buy equipment, expected to be repaid once bank financing closed, was promised 15% of future gross receipts and possibly a 10% stock interest in a corporation they hoped to form later, and had no role in management or responsibility for losses.

When the venture collapses before incorporation, is Victor most likely a partner or a creditor?

Explanation. The majority treated a financier as a creditor where he provided interim financing, expected repayment, bore no liability for losses, and had no management role. Sharing gross returns does not by itself establish a partnership, and contemplated future stock ownership is not enough. The inquiry turns on the intended relationship shown by the whole arrangement and conduct, not labels alone.