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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: May 8, 2016

Court Holds on Summary Judgment that Partnership Did Not Exist

On April 22, 2016, Justice Rosenbaum of the Monroe County Commercial Division issued a decision in Hammond v. Smith, 2016 NY Slip Op. 50670(U), holding on summary judgment that a partnership did not exist, explaining:

A partnership is an association of two or more persons to carry on as co-owners a business for profit. An indispensable essential of a contract or partnership or joint venture, both under common law and statutory law, is a mutual promise or undertaking of the parties to share in the profits of the business and submit to the burden of making good the losses. The Court of Appeals has stated:

Partnership results from a contract, express or implied. If denied it may be proved by the production of some written instrument; by testimony as to some conversation; by circumstantial evidence. If nothing else appears the receipt by the Defendant of a share of the profits of the business is enough.

The Fourth Department has provided the following instruction: In deciding whether a partnership exists, the factors to be considered are the intent of the parties (express or implied), whether there was joint control and management of the business, whether there was a sharing of the profits as well as a sharing of the losses, and whether there was a combination of property, skill or knowledge. Where there is no written agreement, a court must ascertain whether a partnership in fact existed from the conduct, intention, and relationship between the parties. While the existence of partnership ultimately depends upon the individuals’ intent, the name they give their agreement is not dispositive. Even an agreement to distribute the proceeds of an enterprise upon a percentage basis does not give rise to a joint venture if the enterprise does not represent a joinder of property, skills, and risks. No one factor is determinative; it is necessary to examine the parties’ relationship as a whole.

The fact that the parties held themselves out as partners is not decisive; calling an organization a partnership does not make it one. It should be noted that calling an organization a partnership does not make it one. Rather, the ultimate inquiry is whether the parties have so joined their property, interests, skills and risks that for the purpose of the particular adventure their respective contributions have become as one and the commingled property and interests of the parties have thereby been made subject to each of the associates on the trust and inducement that each would act for their benefit.

Here, Defendant presents to the Court prima facie proof that the parties herein never came to a meeting of the minds as to a partnership. The parties did not share profits, did not share losses, did not jointly own partnership assets, did not jointly manage and control the project, did not share joint liability to creditors, and did not jointly contribute capital to the project. The parties’ general interest in creating a partnership does not equate to the actual creation of a partnership where the parties never came to a meeting of the minds and did not agree upon the terms and form of their relationship.

(Internal quotations and citations omitted) emphasis added).

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