CH. 41: Q14

14. Thomas Smith and Jackie Lea were partners in the logging business. In January 1981, they joined Gordon Redd and went into business running a sawmill, calling the business Industrial Hardwood Products (IHP). Smith and Lea used their logging equipment at the mill site. Smith hauled 400 loads of gravel, worth some $26,000, from his father's land for the mill yard in the process of getting the mill operational. Smith and Lea received $300 a week compensation for their work, which was reported on federal W-2 forms. They worked up to 65 hours per week and were not paid overtime. All three discussed business decisions. Smith and Lea had the authority to write checks and to hire and fire employees. Lea left the business in 1983 and was paid $20,000 by Redd. The testimony indicated that the three individuals agreed in January 1981 that as soon as the bank was paid off and Redd was paid his investment, Lea and Smith would be given an interest in the mill. No written agreement existed. Redd invested $410,452 in the business and withdrew $500,475 from it. As of December 31, 1986, IHP had sufficient retained earnings to retire the bank debt. In April 1987, Smith petitioned the Chancery Court for dissolution of the "partnership" and an accounting. Redd denied that any partnership agreement was formed and asserted that Smith was an employee because he was paid wages. He offered to pay Smith $50,000 for the gravel and use of his equipment. Decide. [Smith v. Redd, 593 So. 2d 989 (Miss.)]

Business Law II

CH. 42: Q09

9. Hacienda Farms, Ltd., was organized as a limited partnership with Ricardo de Escamilla as the general partner and James L. Russell and H. W. Andrews as limited partners. The partnership raised vegetables and truck crops that were marketed principally through a produce concern controlled by Andrews. All three individuals decided which crops were to be planted. The general partner had no power to withdraw money from the partnership's two bank accounts without the signature of one ofthe limited partners. After operating for some seven and one-half months under these procedures, the limited partners demanded that the general partner resign as farm manager, which he did. Six weeks later, the partnership went into bankruptcy. Laurance Holzman, as trustee in bankruptcy, brought an action against Russell and Andrews, claiming that they had become liable to the creditors of the partnership as general partners because they had taken part in the control of the partnership business. How would you decide the case under the ULPA? Would the outcome be different under the RULPA? [Holzman v. de Escamilla, 195 P.2d 833 (Cal. App.)]