accounting-Jesse Ingram, a licensed psychologist, and Louis Deere,

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?