Court Affirmed Finding That An Oral Partnership Existed And That A Partner Breached Fiduciary Duties

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In Harun v. Rashid, two individuals started a restaurant business; one operated the business and the other financed it. No. 05-16-00584-CV, 2018 Tex. App. LEXIS 231 (Tex. App.—Dallas January 9, 2018, no pet. history). After some disagreements, the operator froze the financier out of the business. The financier sued, asserting claims of breach of fiduciary duty and breach of contract, and sought actual and exemplary damages and attorney’s fees. The case proceeded to trial before the court, and the court entered a judgment awarding the financier actual damages of $36,000, exemplary damages of $36,000, and attorney’s fees of $79,768.64.

On appeal, the operator argued that there was no evidence of a partnership. The court of appeals noted:

In determining whether a partnership was created, we consider several factors, including (1) the parties’ receipt or right to receive a share of profits of the business; (2) any expression of an intent to be partners in the business; (3) participation or right to participate in control of the business; (4) any agreement to share or sharing losses of the business or liability for claims by third parties against the business; and (5) any agreement to contribute or contributing money or property to the business. Proof of each of these factors is not necessary to establish a partnership. We review the factors under the totality of the circumstances.

Id. Under these factors, the court of appeals affirmed the trial court’s finding of a partnership:

At trial, Rashid presented evidence through his testimony that: (a) Huran approached him indicating he had found a good location to open a restaurant and needed a partner to finance the operation; (b) Huran asked him to be his partner; (c) he and Huran were equal business partners in the restaurant; (d) he and Huran agreed to share equally in the profits and losses; (e) he and Huran met with the leasing agents to negotiate the lease of the restaurant space; (f) he and Huran had equal access to the restaurant’s bank account; (g) he hired and communicated with the bookkeeper; (h) he was very involved in preparing paperwork for the restaurant; (i) he paid restaurant related bills, and purchased furniture and equipment for the restaurant; (j) he was not an employee of the restaurant or Harun, nor did he receive any pay for the work he performed on behalf of the restaurant; and (k) he invested approximately $60,000 in the business. We conclude the trial court’s finding a partnership existed between Huran and Rashid is supported by more than a scintilla of evidence, and is not against the great weight and preponderance of the evidence as to be clearly wrong and unjust. Accordingly, we overrule appellants’ first issue.

Id. The court affirmed the trial court’s judgment.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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