Summers v. Dooley

Supreme Court of Idaho · Corporations

CorporationsPartnershipsPartner management authorityReimbursement of partnership expensespartnershipequal management rightsmajority of partnersordinary matters

Facts

Summers and Dooley formed a two-man partnership in 1958 to operate a trash collection business. In 1966, Summers proposed hiring an additional employee, but Dooley refused and made clear he was voting no. Summers nevertheless hired the worker on his own initiative and paid him from his own pocket, while Dooley objected and refused to pay the expense from partnership funds. Summers later sued, claiming he had paid more than $11,000 in such expenses without reimbursement.

Issue

Whether one equal partner in a two-man partnership may hire an additional employee over the express objection of the other partner and then require the dissenting partner or the partnership to reimburse the cost.

Rule

Under I.C. § 53-318, all partners have equal rights in management, and differences as to ordinary matters connected with the partnership business must be decided by a majority of the partners unless the partners have agreed otherwise. In a two-person partnership, when the partners are equally divided on an ordinary business matter, the partner opposing the change prevails, so the other partner cannot unilaterally impose the expense on the partnership or the dissenting partner.

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

Nina Patel and Owen Brooks are equal partners in a lawn-care business in Columbus, Ohio. Nina proposed hiring a seasonal crew member for routine mowing routes, but Owen expressly said no; Nina hired the worker anyway and paid the wages herself for four months.

If Nina later sues Owen for reimbursement from partnership funds for the wages she paid, what is the most likely result?

Explanation. The majority rule is that partners have equal management rights, and differences as to ordinary matters connected with the partnership business must be decided by a majority unless the partners agreed otherwise. In a two-person partnership, a 1-1 split yields no majority, so the partner seeking the change may not unilaterally bind the partnership or the dissenting partner to the expense. Hiring routine labor is an ordinary matter, so Nina cannot obtain reimbursement merely because she chose to proceed. (Derived from Summers v. Dooley (n.d.).)