Why don’t we learn from other people’s mistakes? I have no idea, but Sewing v. Bowman is a good example of what happens when we don’t. The question was whether or not two friends of almost 50 years formed a partnership. This case is not about buying leases and drilling wells, but it very well could be. The court said there was a partnership, but life (and death) would have been easier if there had been a written partnership agreement.
The friends orally agreed to develop real estate and share in the profits. They never got around to reducing their agreement to writing. When one partner died, his estate sued for the value of his partnership interest. The surviving partner argued there was insufficient evidence of formation of a partnership, and that the claim was barred by the Statute of Frauds because it involved the transfer of real estate, which requires a writing.
The court noted that a written contract is not necessary to show the existence of a partnership. Instead, the court looks to the totality of circumstances in considering whether factors required by the Texas Revised Partnership Act are present. The surviving partner’s own testimony showed that money was contributed to the business, and the parties intended to be partners, share in profits, and share in losses. Evidence of four of the five partnership factors was sufficient to support the trial court’s decision (the other factor being the right to particpate in control). The Statute of Frauds did not bar the claim. Merely because the oral partnership agreement involved real estate transactions did not transform the partnership itself into a transaction for the sale of real estate.
Think how much grief, anxiety and expense the decedent could have saved the family he left behind with a just a little forethought.
This case tells us what lawyers who want to avoid trouble tell their clients: “You all have the best of intentions, everybody trusts everybody else, your wives are friends, and (plug in other factors to signify nothing will ever go wrong with the relationship. My personal favorite: You met in church). But put the agreement in writing . . . now . . . before somebody gets run over by the proverbial bus (powered natural gas, of course) or changes his mind, or the deal goes south and the creditors are circling like vultures.