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CASE 30-1
IN RE KEYTRONICS
Supreme Court of Nebraska, 2008
274 Neb. 936, 744 N.W.2d 425
http://scholar.google.com/scholar_case?case=18315123236442947796&q=744+N.W.2d+425&hl=en&as_sdt=2,34
McCormack, J.
[In 1999 King was doing business under the name of “Washco” as a sole proprietorship engaged
in selling, installing, and servicing carwash systems and accessories. King offered to his
customers the “QuikPay” system, a cashless vending system for carwashes that used a memory
chip key that interacted with a controller at the carwash. Either a cash value can be placed on the
key or the carwash usage recorded on the key is billed monthly. Washco purchased QuikPay
systems for resale from Datakey Electronics Inc. (Datakey) but it was becoming unprofitable for
Datakey, partly because the keys for QuikPay could only be obtained from an attendant.
According to Glen Jennings, president of Datakey, since most carwashes are unattended, this
reliance on the presence of the carwash owner or employee was limiting the product’s market.
As QuikPay’s largest distributor, King was aware that QuikPay’s limitations made the
product unattractive to many of his customers. King contacted Willson, an electronics technician
According to King there was an oral agreement among himself, Willson, and Scott Gardeen
(an employee of Datakey who was an original designer of QuikPay) to form a corporation
whenever Willson developed the key dispenser-revalue station. The three parties met in the
spring of 2002 to discuss the venture in which they would design and build the key
dispenser-revalue station and sell it to Datakey. It was agreed that Willson would write the
software and do the firmware, hardware, and any other electrical or software work; Gardeen
would contribute his knowledge of the system and his contact with Datakey; and King would
contribute financial resources and his experience and contacts as QuikPay’s largest distributor.
Together, Willson, King, and Gardeen came up with the name “Secure Data Systems” for their
Around October 2002, Datakey decided to discontinue its QuikPay line and referred all of its
customers to King for continued support of the system. By the beginning of 2003, King had
deliberately separated his QuikPay sales, maintenance, and its future development from his
Washco carwash business and had moved all QuikPay business to Secure Data Systems. Around
the same time, Willson developed a website for Secure Data Systems with e-mail accounts for
King and Willson.
By the spring of 2003, Willson’s work for Secure Data Systems consisted primarily of
dealing with QuikPay maintenance and repair issues, although he continued to try to finish the
key dispenser-revalue station whenever he had time. Willson made changes in the QuikPay
software to fix problems that customers wanted fixed.
In May 2003, King and Willson went together to an international carwash convention in Las
Vegas, Nevada. King suggested to Willson that he make up Secure Data Systems business cards
Willson estimated that he had put at least 2,000 hours into QuikPay sales and maintenance
and in developing the key dispenser-revalue station. When Willson was asked why he invested
his time and expertise into QuikPay without any remuneration, he explained, “That was my
contribution to the company. I mean that was my piece.” Willson contacted a law firm to draw up
papers to formalize the partnership. These papers were never drafted. According to Willson,
when he told King he was looking into creating a written agreement for their relationship, King
“assured [him] that he was having his attorneys look at it.” King and Willson had another
meeting around the end of December and agreed to end their relationship and any joint QuikPay
or key dispenser-revalue station activities. Approximately two weeks after this meeting, King
called Willson and offered to compensate him for the time he had spent in maintaining or
repairing QuikPay. Willson refused.
Willson brought an action for winding up and an accounting, alleging formation of a
partnership. King denied they had formed a partnership. The trial court found that King and
Willson had “pooled resources, money and labor,” but found no partnership existed because there
was no “specific agreement.” Alternatively, the trial court found that because King did not
co-owners a business for profit” and explains that this is true “whether or not the persons intend
to form a partnership.” [Citation.]
* * * [W]hether the business of QuikPay maintenance, or even the development of the
never-produced key dispenser-revalue station, qualifies as a business “for profit” is not in issue.
It is not essential that the business for which the association was formed ever actually be carried
on, let alone that it earn a profit. Rather, a business qualifies under the “business for profit”
element of [Section 202(a)] so long as the parties intended to carry on a business with the
expectation of profits. [Citations.]
* * *
We first consider whether King and Willson formed an association. King correctly points out
that inherent to the term “association” is the idea that the relationship between the “two or more
* * *
In considering the parties’ intent to form an association, it is generally considered relevant
how the parties characterize their relationship or how they have previously referred to one
another. [Citation.] The joint use of a business name is evidence of an association. [Citations.]
This is especially true when the business name is composed of the parties’ names or initials.
[Citations.]
It is undisputed that King and Willson discussed the fact that Secure Data Systems had the
initials of Scott, Don, and Scott. Granted, at its inception, Secure Data Systems was an
association among three parties focused on the limited task of creating a key dispenser-revalue
station. * * * King removed any QuikPay operations from his Washco business. He instead
began to conduct all QuikPay business exclusively through Secure Data Systems. Willson was
clearly associated with King in that venture.
as “the other half of Secure Data Systems.” We believe the evidence is clear that King and
Willson formally associated to develop a key dispenser-revalue station and that further, this
association expanded in scope to encompass all QuikPay operations.
* * * King claims that he started selling and maintaining QuikPay by himself and asserts that
he maintained full control of that business line. According to King, Willson simply did what
King asked him to—apparently for free.
Being “co-owners” of a business for profit does not refer to the co-ownership of property,
[RUPA Section 202(c)(3)] but to the co-ownership of the business intended to garner profits. It is
co-ownership that distinguishes partnerships from other commercial relationships such as
creditor and debtor, employer and employee, franchisor and franchisee, and landlord and tenant.
The objective indicia of co-ownership are commonly considered to be: (1) profit sharing, (2)
control sharing, (3) loss sharing, (4) contribution, and (5) co-ownership of property. [Citation.]
The five indicia of co-ownership are only that; they are not all necessary to establish a
partnership relationship, and no single indicium of co-ownership is either necessary or sufficient
to prove co-ownership. [Citation.]
* * * The record demonstrates that Willson contributed his time and expertise not only to the
business of developing the key dispenser-revalue station, but also to the continued operations of
the regular QuikPay product line. * * *
The continuing investment of one’s labor without pay is generally considered a strong
indicator of co-ownership. [Citations.] * * * Valid consideration for an ownership interest in a
In this case, Willson contributed his time and expertise without any compensation for
approximately 1 year. Conservatively, Willson estimated his contribution as totaling over 2,000
hours. * * * that without Willson’s technical assistance, King would have been unable to
continue QuikPay’s viability after Datakey abandoned the product. That King could have dealt
with certain issues by hiring contractors or employees is irrelevant. He chose not to do so—
presumably because the promise of the key dispenser-revalue station made a partnership
relationship more worthwhile—and saved himself the expense of paying for this labor.
We also find that despite King’s protestations to the contrary, the evidence shows that King
and Willson shared control over QuikPay business. * * *
* * *
Willson also testified that he had an agreement with King to share profits, although King
denies this. Of the five indicia of co-ownership, profit sharing is possibly the most important, and
Willson’s testimony that they agreed to share in the profits of the business is, in light of all the
evidence, simply more credible than King’s statement that compensation “was never discussed.”
And even King vaguely admits that they had an understanding to share profits of the key
dispenser-revalue station, if that were developed. * * *
We do not find any evidence that King and Willson had an agreement for loss sharing. But
we find this of little import, since purported partners, expecting profits, often do not have any
explicit understanding regarding loss sharing. [Citation.] Likewise, although King and Willson
Partnership Capital and Property
Partnership capital is the total money and property the partners contribute and
dedicate to use in the enterprise. All property brought into the partnership or
later acquired by it is partnership property.
Questions arise over whether property owned by a partner before formation of
the partnership and that is used in partnership business is a capital contribution
and thus an asset of the partnership. Ultimately, the partners’ intention
controls whether property belongs to the partnership or to one or more of
the partners in their individual capacities.
The intention to consider property as partnership property may be inferred from
any of the following:
• property was improved with partnership funds,
UPA RUPA
The RUPA sets forth two rebuttable presumptions that
apply when the partners have failed to express their
intent.
First, property purchased with partnership funds (cash or
credit) is presumed to be partnership property, without
regard to the name in which title is held.
Second, property acquired in the name of one or more of
the partners, without an indication of their capacity as
partners and without use of partnership funds or credit, is
presumed to be the partners’ separate property, even if
used for partnership purposes.
CASE 30-2
THOMAS v. LLOYD
Missouri Court of Appeals, Southern District, Division One, 2000
17 S.W.3d 177
http://scholar.google.com/scholar_case?case=17595001908950706244&q=17+S.W.3d+177&hl=en&as_sdt=2,34
Shrum, J.
Plaintiff’s husband of thirty years died in February 1988. In February 1989, Plaintiff met
Defendant in Mobile, Alabama, while traveling. Their chance meeting quickly blossomed into a
romantic relationship. When Plaintiff returned to her home in Maryland in late February 1989,
Defendant accompanied her and they began living together.
Initially, Defendant told Plaintiff he worked for a major oil company, had been outside the
country for the past three years, was independently wealthy, and was not married. As Plaintiff
later learned, none of these statements was true. In truth, Defendant had recently been released
from prison. He had multiple criminal convictions, including convictions for counterfeiting and
stealing. Further, Defendant’s assets at the time were no more than $2,000, and he was legally
married to Patricia Lloyd.
Evidence as to when Plaintiff learned of Defendant’s deceptions was contradictory. The trial
court found that Plaintiff first learned of Defendant’s criminal history and lack of wealth soon
after she returned to Maryland in February 1989. It found that Plaintiff discovered Defendant
was not single “soon after her void marriage to Defendant.” The parties’ “void marriage”
occurred July 10, 1989, in Canada.
Except for occasional vacations, Plaintiff and Defendant resided in Plaintiff’s home in
Maryland from late February 1989 through October 1990. During that period, Defendant made
By the time of trial, Plaintiff s expenditures for labor and materials on the home exceeded
$201,000.
A progressive deterioration in the parties’ relationship led to the filing of this multiple-count
lawsuit in October 1995. [The trial court found that the subject real estate was not a partnership
asset and ordered it be sold at public auction and the net sale proceeds to be distributed
ninety-eight percent to Plaintiff and two percent to Defendant. The Defendant appealed the trial
court’s refusal to classify farm real estate as a partnership asset.]
“The true method of determining whether, as between partners themselves, land standing in
the names of individuals is to be treated as partnership property is to ascertain from the conduct
of the parties and their course of dealing, the understanding and intention of the partners
themselves, which, when ascertained, unquestionably should control.” [Citations.] Whether real
estate titled in the names of individual partners is partnership property is a question of fact and
the burden of proof is on the one alleging that the ownership does not accord with the legal title.
[Citation.]
In attempting to demonstrate that the parties intended for the real estate to be a partnership
asset, Defendant points to the joint ownership of the farm and the fact that the parties operated
the partnership cattle business on the farm as evidence that the two understood and intended for
the farm to be a partnership asset. His reliance on those facts is misplaced, however. A joint
purchase of real estate by two individuals does not, in and of itself, prove the land is a
partnership asset. [Citation.] On the contrary, when land is conveyed to partnership members
without any statement in the deed that the grantees hold the land as property of the firm, there is
a presumption that title is in the individual grantees. [Citation.] * * * The mere use of land by a
partnership does little to show the land is owned by the partnership. [Citation.] * * *
Defendant points to evidence that some real estate taxes and promissory note payments for
the farm came from partnership funds. He argues such evidence indicates the parties intended the
Other evidence from which the parties’ intent can be gleaned includes the following: (A)
Plaintiff and Defendant signed as individuals on the $50,000 purchase money note and deed of
trust securing the same, without a recital of partnership status; (B) neither party filed a
partnership income tax return; (C) Plaintiff filed income tax returns as an individual; (D)
