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Eagan v. Gory

2009 WL 483851 (U.S. Dist. Ct. D. N.J. 2009) (Unpublished)

PARTNERSHIPS — Not every business arrangement where profits are shared is a partnership.

A real estate agent, as a sideline to his business, located properties and then purchased, renovated, and sold them. The agent claimed he entered into an oral partnership with his future father-in-law whereby he would locate properties and fix them up while the father-in-law would finance the venture. He also claimed that both before and during his marriage, he and his father-in-law agreed to split the profits from these deals when the properties were sold even though the father-in-law paid all the money to purchase and renovate the properties. A dispute arose after the agent divorced the father-in-law’s daughter. The now ex-father-in-law refused to give the agent any portion of the profits from these transactions.

The agent sued his former father-in-law. The agent asserted that he was entitled to a fifty percent share of profits earned from the sale of three properties. His ex-father-in-law counterclaimed that he was owed $75,000 in repayment of the loan. The agent did not contest that he owed the money and the Court entered judgment against him to repay the loan without interest. As to the partnership formation, the Court noted that the agent had the burden of proving a partnership existed. Several factors were considered. First, was the issue of intent. The Court found that the only reason the father-in-law dealt with the agent was to assist his daughter. Thus, when the marriage ended there was no business reason to continue the relationship. The agent was in a poor financial position and the father-in-law was a successful businessman with no need to be involved with this individual. Second, the Court inquired as to whether the parties had a mutual obligation to share losses. Here, the Court found that the agent was in no position to share financial responsibility for any business loss. Third, the Court looked to who owned and controlled the properties. In this case, the father-in-law owned and controlled all of the properties and the agent contributed no capital to the alleged partnership. All significant decisions relating to the properties were made by the father-in-law. In addition, the agent conceded that the father-in-law had the discretion to decide when and how much to pay him prior to the agent’s divorce with his ex-father-in-law’s daughter. Fourth, the parties never held themselves out to be partners. And, there was no evidence that the parties ever used the word partner, either in writing or orally. Thus, the Court did not believe that a partnership existed by implication. Fifth, although the Court noted that the father-in-law did share profits with the agent on three occasions, it held that not every business arrangement where profits are shared is a partnership. In this case, the Court believed that the payments were more akin to the payment of wages than as payment of a partnership share. Finally, the Court held that a determination of whether a partnership existed is very fact specific and held that no partnership existed after a review of the totality of the circumstances.


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