Page v. Page

• Decision Date: 27 January 1961
• Citation: 55 Cal.2d 192,359 P.2d 41,10 Cal.Rptr. 643
• Court: California Supreme Court
• Parties: , 359 P.2d 41 George B. PAGE, Appellant, v. H. B. PAGE, Respondent. L. A. 25644.

Page 643

10 Cal.Rptr. 643

55 Cal.2d 192, 359 P.2d 41

George B. PAGE, Appellant, v. H. B. PAGE, Respondent.

L. A. 25644.

Supreme Court of California, In Bank.

Jan. 27, 1961.

Cavalletto, Webster, Mullen & McCaughey, Trevey, Schwartz & Wood and Jack A. Otero, Santa Barbara, for appellant.

Schauer, Ryon & McIntyre and Robert W. McIntyre, Santa Barbara, for respondent.

TRAYNOR, Justice.

Plaintiff and defendant are partners in a linen supply business in Santa Maria, California. Plaintiff appeals from a judgment declaring the partnership to be for a term rather than at will.

The partners entered into an oral partnership agreement in 1949. Within the first two years each partner contributed approximately $43,000 for the purchase of land, machinery, and linen needed to begin the business. From 1949 to 1957 the enterprise was unprofitable, losing approximately $62,000. The partnership's major creditor is a corporation, wholly owned by plaintiff, that supplies the linen and machinery necessary for the day-to-day operation of the business. This corporation holds a $47,000 demand note of the partnership. The partnership operations began to improve in 1958. The partnership earned $3,824.41 in that year and $2,282.30 in the first three months of 1959. Despite this improvement plaintiff wishes to terminate the partnership.

The Uniform Partnership Act provides that a partnership may be dissolved 'By the express will of any partner when no definite term or particular undertaking is specified.' Corp.Code, § 15031, subd. (1)(b). The trial court found that the partnership is for a term, namely, 'such reasonable time as is necessary to enable said partnership to repay from partnership profits, indebtedness incurred for the purchase of land, buildings, laundry and delivery equipment and linen for the operation of such business. * * *' Plaintiff correctly contends that this finding is without support in the evidence.

Defendant testified that the terms of the partnership were to be similar to former partnerships of plaintiff and defendant, and that the understanding of these partnerships was that 'we went into partnership to start the business and let the business operation pay for itself, put in so much money, and let the business pay itself out.' There was also testimony that one of the former partnership agreements provided in writing that the profits were to be retained until all obligations were paid.

Upon cross-examination defendant admitted that the former partnership in which the earnings were to be retained until the obligations were repaid was substantially different from the present partnership. The former partnership was a limited partnership and provided for a definite term of five years and a partnership at will thereafter. Defendant insists, however, that the method of operation of the former partnership showed an understanding that all obligations were to be repaid from profits. He nevertheless concedes that there was no understanding as to the term of the present partnership in the event of losses. He was asked: '(W)as there any discussion with reference to the continuation of the business in the event of losses?' He replied, 'Not that I can remember.' He was then asked, 'Did you have any understanding with Mr. Page, your brother, the plaintiff in this action, as to how the obligations were to be paid if there were losses?' He replied, 'Not that I can remember. I can't remember discussing that at all. We never figured on losing, I guess.'

Viewing this evidence most favorably for defendant, it proves only that the partners expected to meet current expenses from current income and to recoup their investment if the business were successful.

Defendant contends that such an expectation is sufficient to create a partnership for a term under the rule of Owen v. Cohen, 19 Cal.2d 147, 150, 119 P.2d 713. In that case we held that when a partner advances a sum of money to a partnership with the understanding that the amount contributed was to be a loan to the partnership and was to be repaid as soon as feasible from the prospective profits of the business, the partnership is for the term reasonably required to repay the loan. It is true that Owen v. Cohen, supra, and other cases hold that partners may impliedly agree to continue in business until a certain sum of money is earned (Mervyn Investment Co. v. Biber, 184 Cal. 637, 641-642, 194 P. 1037), or one or more partners recoup their investments (Vangel v. Vangel, 116 Cal.App.2d 615, 625, 254 P.2d 919), or until certain debts are paid (Owen v. Cohen, supra, 19 Cal.2d at page 150, 119 P.2d at page 714), or until certain property could be disposed of on favorable terms (Shannon v. Hudson, 161 Cal.App.2d 44, 48, 325 P.2d 1022). In each of these cases, however, the implied agreement found support in the evidence.

In Owen v. Cohen, supra, the partners borrowed substantial amounts of money to launch the enterprise and there was an understanding that the loans would be repaid from partnership profits. In Vangel v. Vangel, supra, one partner loaned his co-partner money to invest in the partnership with the understanding that the money would be repaid from partnership profits. In Mervyn Investment Co. v. Biber, supra, one partner contributed all the capital, the other contributed his services, and it was understood that upon the repayment of the contributed capital from partnership profits the partner who contributed his services would receive a one-third interest in the partnership assets. In each of these cases the court properly held that the partners impliedly promised to continue the partnership for a term reasonably required to allow the partnership to earn sufficient money to accomplish the understood objective. In Shannon v. Hudson, supra, the parties entered into a joint venture to build and operate a motel until it could be sold upon favorable and mutually satisfactory terms, and the court held that the joint venture was for a reasonable term sufficient to accomplish the purpose of the joint venture.

In the instant case, however, defendant failed to prove any facts from which an agreement to continue the partnership for a term may be implied. The understanding to which defendant testified was no more than a common hope that the partnership earnings would pay for all the necessary expenses. Such a hope does not establish even by implication a 'definite term or particular undertaking' as required by section 15031, subdivision (1)(b) of the Corporations Code. All...