INGRAM
v. DEERE
SUPREME
COURT OF TEXAS
Jesse Ingram, a licensed psychologist, and Louis
Deere, a board certified psychiatrist, entered into an oral agreement providing
that Dr. Deere would serve as the medical director for a multidisciplinary pain
clinic. Dr. Deere contends that they agreed he would receive one-third of the
clinic’s revenues, Dr. Ingram would receive one-third, and the remaining
one-third would be used to pay the clinic’s expenses. Dr. Deere also claims
that when he and Ingram began working together, Ingram told him their work “was
a joint venture, or [they] were partners, or [they] were doing this together.”
Fourteen
months after Dr. Deere began working at the clinic, Dr. Ingram prepared a
written agreement to memorialize their arrangement. The document stated Dr.
Ingram was the “sole owner” of the clinic. Subsequently, Dr. Deere refused to
sign the document, claiming that it contradicted their initial arrangement.
Immediately after Deere received the document, he ceased working at the clinic
and later sued Ingram, asserting claims of common law fraud, statutory fraud,
fraudulent inducement, breach of contract, and breach of fiduciary duty. The
appellate court supported the jury’s finding that a partnership existed between
Dr. Deere and Dr. Ingram. Subsequently, the Supreme Court of Texas must
determine whether Dr. Deere and Dr. Ingram indeed created a partnership for
their pain clinic.
JUDGE
WAINWRIGHT: The Texas Uniform Partner- ship Act (TUPA) was passed in 1961 and
substantially adopted the major provisions of the Uniform Partnership Act
(UPA), which itself was adopted in every state except Louisiana after it was
approved by the National Conference of Commissioners on Uniform State Laws in
1914. TUPA was replaced by The Revised Partnership Act (TRPA), effective
January 1, 1994, the result of a project of the Partner- ship Law Committee of
the State Bar of Texas Section on Business Law and the Texas Business Law
Foundation Act of May 31, 1993. TRPA carried forward some of the common law
modifications in ways relevant to this case that were promulgated in TUPA. The
partnership in this case was allegedly formed in 1997. It is uncontested that
TRPA governs this dispute; rather, the parties contest whether Deere has proven
the existence of a partnership under TRPA.
TRPA
provides that “an association of two or more per- sons to carry on a business
for profit as owners creates a partnership.” Unlike TUPA, TRPA articulates five
factors, similar to the common law factors that indicate the creation of a
partnership. They are:
(1) Receipt or right to receive a share of
profits of the business;
(2) Expression of intent to be partners in
the business;
(3) Participation or right to participate in
control of the business;
(4) Sharing or agreeing to share:
(A) Losses of the business; or
(B)
Liability for claims by third parties against the
Business;
and
(5) Contributing or agreeing to contribute
money or property to the business.
The
common law required proof of all five factors to establish the existence of a
partnership. TRPA contemplates a less formalistic and more practical approach
to recognizing the formation of a partnership.
First,
TRPA does not require direct proof of the par- ties’ intent to form a
partnership. Formerly, the intent to be partners was a “prime,” although not
controlling, element in the creation of a partnership. Instead, TRPA lists the
“expression of intent” to form a partnership as a factor to consider. Second,
unlike the common law, TRPA does not require proof of all of the listed factors
in order for a partnership to exist. Third, sharing of profits—deemed essential
for establishing a partnership under the common law—is treated differently
under TRPA because sharing of profits is not required. Still, TRPA comments
note that the traditional import of sharing profits as well as control over the
business will probably continue to be the most important factors.
Profit
Sharing
Deere
argues that he received or had the right to receive a share of the clinic’s
profits because he and Ingram had an agreement in which each of them would
receive one-third of the clinic’s “gross revenue” and the remainder would be
used for expenses. It is true that the “receipt or right to receive a share of
profits of the business” may be indicative of the existence of a partnership
under TRPA, but a share of profits paid as “wages or other compensation to an
employee or independent contractor” is not indicative of a partner- ship
interest in the business. The evidence does not establish that Deere received a
share of profits as contemplated under TRPA . . . [because] the agreement
between Ingram and Deere cannot constitute Deere’s receipt of “profits,” but
rather of gross revenue.
Second,
Ingram wrote twenty checks to Deere as compensation from January 1997 until
March 1999. These checks referred to Deere as a “medical consultant” and the
payments as “contract labor.” Therefore, they contradict his argument that he
received profits as a partner in the clinic.
Expression
of Intent to be Partners
“[E]expression
of an intent to be partners in the business” is one of five factors courts use
in determining whether a partnership exists. This is different from the common
law definition of a partnership that required proof that the parties intended
to form a partnership at the outset of their agreement. When analyzing
expression of intent under TRPA, courts should review the putative partners’
speech, writings, and conduct. Evidence of expressions of intent could include,
for example, the parties’ statements that they are partners, one party holding
the other party out as a partner on the business’s letterhead or nameplate, or
in a signed partnership agreement.
Deere
argues that he expressed his intent to be a partner with Ingram by sharing the
clinic’s profits and losses and having access to the clinic’s records. His
evidence of other factors, sharing of profits and losses and control of the
business, is insufficient to establish expression of intent. Deere’s evidence
is also insufficient because there must be evidence that both parties expressed
their intent to be partners.
Deere
also testified that the clinic kept its established name after he joined as the
medical director, and he and Ingram never discussed a name change. He never
signed a lease agreement for the building owned by Ingram where the clinic was
housed, was not named on the clinic’s bank account, never signed a signature
card for the clinic’s bank account, and never filed taxes representing that he
was co-owner of the clinic. Additionally, Deere paid his own medical
malpractice insurance, which he acknowledged was his common practice when he
did contract work. Deere can- not provide the content, context, or
circumstances to give any of the alleged expressions of intent legal
significance as evidence of a partnership.
Control
Deere
argues he had an equal right to control and manage the clinic’s business
because, although he was never allowed to see the books and records, he
repeatedly requested to see them. He also points to Ingram’s testimony that
“maybe” Deere viewed the clinic’s books on one occasion. Further- more, Deere
argues that he had control because Ingram discussed with him how much the
clinic made, the amounts paid to the staff, and the need to hire Ingram’s wife
as personnel director. No other evidence supports these statements and proves
he participated in or had the right to control the clinic’s business.
Sharing
of Losses and Liability for Third Party Claims According to Deere, he and
Ingram agreed that Deere would receive one-third of the clinic’s gross revenue,
Ingram would receive one-third of the clinic’s gross revenue, and the remainder
would be used to pay clinic expenses. Deere argues that this agreement
determined how losses would be shared, but he testified that there was never a
discussion of how expenses in excess of one-third of the clinic’s gross revenue
would be divided between him and Ingram. Here, Ingram and Deere never discussed
what would hap- pen to the allocation if expenses exceeded one-third of the
revenue or gross income. They never discussed losses, only expenses. There is
no legally cognizable evidence to support the contention that Ingram and Deere
agreed to share losses.
Contribution
of Money or Property
Finally,
there is no evidence that Deere “contribut[ed] or agree[d] to contribute money
or property” to the clinic as a partner. Deere does not argue that there was
any agreement that he contribute either money or property to the enterprise.
Furthermore, Deere does not contend that he actually contributed money to the clinic.
In fact, Deere acknowledged at trial that he did not contribute to clinic
renovations or the purchase of medical equipment and sup- plies and that he did
not agree to use his personal resources to pay for any expenses in the
operation of the clinic. Rather, Deere’s only argument regarding this factor is
that he contributed his reputation as property to the alleged partnership.
In
this case, Deere has not provided legally sufficient evidence of any of the
five TRPA factors to prove the existence of a partnership. Accordingly, we
reverse the court of appeals’ judgment.
REVERSED.
On what
facts did the court base its decision that there was insufficient evidence to
demonstrate a partnership under the TRPA? Why do you think Dr. Ingram acted in
this way? Do you agree with the court’s decision based on the language of the
TRPA? Be specific and elaborate—do not just say yes or no. Why or why not? What
do you think Dr. Deere should have done before entering into this arrangement
with Dr. Ingram?
