NY: Underlying Commercial Transaction
Facts: Plaintiff filed a legal malpractice action against Fischer & Yanowitz, and Jeffery Yanowitz. Plaintiff filed a motion to join Patricia Fischer and Jeffery Yanowitz as partners based upon partnership law and the doctrine of partnership by estoppel. The Supreme Court, Kings County granted plaintiff’s motion to consolidate, and denied a motion by Yanowitz for summary judgment dismissing the complaint insofar as asserted against him.
Issue: Does a partnership exist between parties who do not agree to share in the profits or losses of a business?
Ruling: A partnership did not exist between Fischer and Yanowitz, as there was no mutual promise or undertaking to share in the profits in the business or to submit to the burden of making good the losses. The doctrine of partnership by estoppel was inapplicable because Yanowitz never represented that him and Fischer were partners, there was no evidence that he consented to Fischer representing him as a partner, nor was there any indication that plaintiff relied on Fischer and Yanowitz being partners in retaining Fischer as counsel.
Lesson: If there is no written agreement between the parties, a court will look to the conduct, intention, and relationship of the parties to determine if a partnership exists. A partnership does not exist if there is no “mutual promise or undertaking of the parties to share in the profits of the business and submit to the burden of making good the losses.”
A court will impose a partnership under the doctrine of partnership by estoppel, Partnership Law §27, when
“a person, by words spoken or written or by conduct, represents himself, or consents to another representing him to any one, as a partner in an existing partnership or with one or more persons not actual partners, he is liable to any such person to whom such representation has been made, who has, on the faith of such representation, given credit to the actual or apparent partnership, and if he has made such representation or consented to its being made in a public manner he is liable to such person, whether the representation has or has not been made or communicated to such person so giving credit by or with the knowledge of the apparent partner making the representation or consenting to its being made.”