Jack Stauber 1

BLAW 308-4575

March 1, 2022

Ch. 37 Case Briefs

1. MP Nexlevel of Cal., Inc. v. CVIN

Issue: Would CENIC be classified as a purported partner in the contract agreement made between

MP and CVIN?

Rule: Under the doctrine of Purported Partners, “a person will be a purported partner and have

liability when the three elements of RUPA section 308(a) are met: (1) A person purports to be or

consents to being represented as a partner of another person or partnership. (2) A third party

relies on the representation of and (3) The third party transacts with the actual or purported

partnership”.

Application: This case concerns disputes that arose over a large-scale broadband infrastructure

construction project throughout California’s Central Valley. The goal of the project is to create

an approximately 1,371-mile broadband fiber network through 18 Central Valley counties.

Because of various ongoing disputes that arose during the construction of the Project,

plaintiff MP Nexlevel (MP) brought this suit against defendant CVIN LLC (CVIN), d/b/a Vast

Networks, and defendant Corporation for Education Network Initiatives in California (CENIC),

a nonprofit corporation. MP brings 47 claims against CVIN based on disputes concerning the

construction of the Project. MP asserts its claims against the Member Defendants on the ground it

is CVIN’s partner under California Corporations Code § 16308(a).

MP asserts that CVIN and CENIC were in a legal partnership such that CENIC should be

liable for CVIN’s alleged conduct as CVIN’s partner. As proof of their purported partnership, MP

points to, among other things, the joint application by CVIN and CENIC for the grant funding and

various representations they made. CVIN, along with its partner CENIC, submitted an application
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for the grant funding (the grant application). On the grant application, CENIC was named as a

proposed subrecipient of the grant by CVIN and represented that CVIN and CENIC were in a

“public-private partnership”. In the grant application, CVIN and CENIC represented that

CVIN/CENIC would build the project and that in a public-private partnership, CVIN and CENIC

would build, operate, and maintain the project. MP alleges that CVIN and CENIC made

representations in the grant application, websites, and elsewhere that demonstrate they were in a

legal partnership. CENIC announced on its website that the “project was designed and

developed by the public-private partnership of CVIN and CENIC, a non-profit corporation to

improve the availability of broadband networking infrastructure for 18 counties within the

California Central Valley area".

The complaint stated that both CVIN and CENIC, by words on grant applications, in

websites, and elsewhere, and by their conduct in jointly applying for grants, held themselves out

as partners or in a partnership. Plaintiff further alleged that neither CENIC nor CVIN disclaimed

their representations of being in a partnership, nor did CVIN or CENIC take any steps to publicly

deny the many statements of their partnership or clarify the true nature of their relationship. MP

therefore claims that because CENIC and CVIN presented themselves to the outside world as a

partnership, CENIC has liability even if CENIC is not an actual partner to CVIN in the Project.

MP alleges that CENIC and CVIN’s representations and course of conduct indicating that they

were partners, along with MP’s reasonable reliance on the same, adequately supports liability

of CENIC. CENIC and Member Defendants have moved to dismiss the complaint under Fed. R.

Civ. P. 12(b)(6).

To succeed on its claims, MP bears the burden of proving by a preponderance of the

evidence that a partnership exists between CVIN and CENIC. A “purported partner is liable to
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the person to whom the representation is made if that person, relying on the representation, enters

into a transaction with the alleged partnership." However, “the conduct of the ostensible partner

must be sufficient to induce a reasonable and prudent person to believe that a partnership exists

and for that person to enter into a transaction on that belief”. MP argues a partnership by estoppel

exists between CVIN and CENIC for three primary reasons: (1) CVIN and CENIC publicly

represented in the grant application and on their websites that they were in a “partnership”; (2)

CVIN and CENIC jointly applied for the grant funding; and (3) CVIN and CENIC represented

that they would jointly build, operate, maintain, and manage the Project. And because of this

conduct, MP relied, in part, on the representations of both CVIN and CENIC that they were in

a partnership and would jointly build and operate the Project. MP alleges that CVIN and CENIC

represented in the grant application and on their websites that they were “partners” or were in a

“partnership”. As other courts have noted, the term “partnership” has a colloquial meaning that

describes a relationship rather than “a legal partnership that gives rise to fiduciary duties.”

MP does not provide and the Court cannot find any authority holding that two parties

publicly describing themselves as “partners” or describing their relationship as a “partnership”

is sufficient, without more, to establish a legal partnership, as MP suggests. Moreover, the

allegations in the complaint seem to indicate that CVIN and CENIC used the words “partner”

and “partnership” in the colloquial sense of the word meaning a relationship rather than a legal

partnership. Likewise, MP does not provide and the Court cannot find any authority holding that

two parties jointly applying for and receiving federal grant funding, in and of itself, suffices a

legal relationship, as MP explains. Similarly, MP does not provide and the Court cannot find any

authority holding that a collaboration between two parties to jointly build a project, in and of

itself, suffices a legal partnership, as MP suggests.Thus, the Court finds that the complaint does
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not prove substantial by any means to demonstrate that MP reasonably believed a partnership

existed between CVIN and CENIC.

In addition to alleging sufficient facts to demonstrate that MP reasonably believed a

partnership existed between CVIN and CENIC, which MP does not do, MP must prove without

A doubt that they reasonably relied on that belief when they entered into an agreement with

CVIN. The Court finds that the complaint fails to do so. Accordingly, MP’s claims against

CENIC fail for the additional reason that MP’s alleged reliance on the conduct and

representations of CVINand CENIC was unreasonable given that MP alleges the following: they

entered into 14 contracts with CVIN only under which MP was CVIN’s director contractor; and

assured MP orally and in writing that CVIN alone would pay what was due under the contracts;

and CVIN, not CENIC, allegedly “wrongfully refuses to comply with the payment terms of the

Contracts.” Further, MP does not allege that it had any direct interactions with CENIC when

negotiating or entering the contracts with CVIN or that CVIN made any representations to MP

as to CENIC’s involvement with the contracts. Accordingly, MP fails to allege sufficient facts to

establish that it reasonably believed that CVIN and CENIC were partners or that it reasonably

relied on that belief when it entered into the contracts. MP thus fails to provide facts that show

CVIN and CENIC were purported partners under §16308(a). Thus, all of MP’s causes of action

against CENIC fail because they are contingent on a finding that CVIN and CENIC are partners

under §16308(a).

Conclusion: The Court thus grants the defendant’s motion to dismiss because the evidence

brought forth by MP is not sufficient to prove that they relied on a partnership or that they

reasonably relied on that belief when they entered into an agreement with CVIN.
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2. Finch v. Raymer

Issue: Was there a partnership agreement between Mr. Finch and Ms. Raymer over a property

dispute?

Rule: Tenn. Code Ann. § 61-1-202(a) of the Revised Uniform Partnership Act provides that “the

association of two (2) or more persons to carry on as co-owners of a business for profit forms a

partnership, whether or not the persons intend to form a partnership. That is to say if they place

their money, assets, labor, or skill in commerce with the understanding that profits will be shared

between them—the result is a partnership whether or not the parties understood that it would be”.

Application: Jeffrey Finch filed this lawsuit against his former girlfriend, Tina Raymer, in May

2008. Mr. Finch’s complaint alleged that he and Ms. Raymer cohabitated for several years, and

during their “partnership,” they acquired certain real and personal property as partnership

property. Mr. Finch alleged that when the parties separated, Ms. Raymer ordered him to leave the

residence where the par-ties were residing, and she refused to divide the parties’ personal

property. Mr. Finch sought an equal “one-half” division of the alleged partnership property, or

property held in trust, and he sought an award of attorney fees. An answer to the complaint was

filed denying that any of the disputed property was partnership property. A bench trial was

held on November 10, 2011, in which the trial court heard testimony. Mr. Finch testified

that he and Ms. Raymer worked together renovating the properties that they bought and that

they made money together. He said that both he and Ms. Raymer would search for houses, would

sit down together and look at books to get ideas for house plans, and then would draw up a set of

plans themselves.

However, in determining whether a partnership exists, no one fact or circumstance is

conclusive and all of the relevant facts, actions, and conduct of the parties must be considered.
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The courts regularly derive the partners’ intentions and understandings by considering: (1) the

parties’ statements, conduct, and writings when the property was acquired, (2) the parties’ course

of conduct after the acquisition of the property, (3) the use of the property in the partnership

business, (4) the terms of the partnership agreement, (5) the listing of the property as an asset on

the partnership books and tax returns, (6) the attribution of profits or losses from the property to

the partnership, and (7) the use of partnership funds to maintain the property. The issue of when

property is “acquired by'' a partnership is governed by Tenn. Code Ann. section 61-1-204 (a).

The statute begins by stating, in subsection (a), that “property is deemed partnership property if

acquired in the name of the partnership or in the name of one or more of the partners with an

indication in the instrument transferring title to the property of the person’s capacity as a partner

or of the existence of a partnership”. The statute goes on to provide two rebuttable presumptions

that apply when the partners have failed to express their intent by referring to the existence of a

partnership in the title documents.

First, subsection (c) provides that “property is presumed to be partnership property if

purchased with partnership assets, even if not acquired in the name of the partnership or of one

(1) or more partners with an indication in the instrument transferring title to the property of the

person’s capacity as a partner or the existence of a partnership”. The second, related presumption

is found in subsection (d) of the statute, which provides that “property acquired in the name of

one (1) or more of the partners, without an indication in the instrument transferring title to the

property of the person’s capacity as a partner or of the existence of a partnership and without use

of partnership assets, is presumed to be separate property, even if used for partnership purposes”.

In regards to Ms. Raymer and Mr. Finch, we must derive the partners’ intentions and

understandings to the property by considering numerous factors mentioned above. The first two
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are “the parties’ statements, conduct, and writings when the property was acquired” and “the

parties’ course of conduct after the acquisition of the property”. The Court finds it significant

that the two previous houses where the parties lived, prior to Pack Hill Road, were, undisputedly,

the subject of a partnership agreement between Mr. Finch and Ms. Raymer, whereby the parties

would combine “their money, assets, labor, or skill” with the understanding that profits would be

shared between them.

Although the Pack Hill Road property was titled solely in Ms. Raymer’s name, like the

two properties where they lived before, Mr.Finch testified that the parties looked at the Pack Hill

Road property together and made a decision together to purchase it. The parties drew up plans

for the house together, and it is undisputed that Mr. Finch contributed his labor, carpentry skill,

and earnings to the construction of the residence and the shop on the property. Mr. Finch and Ms.

Raymer jointly executed documents regarding the homeowner’s insurance policy insuring the

property. Partnership funds from the joint account were used to pay the monthly mortgage

payment on the Pack Hill Road residence. Another factor for consideration is “the use of

partnership funds to maintain the property”. The profits of the partnership between 2004 and

2007 were deposited into the joint checking account, and the parties used that account,

containing partnership funds, to pay for improving, insuring, and maintaining the Pack Hill Road

residence.

Another relevant factor for consideration is “the use of the property in the partnership

business”. Mr. Finch reported on his individual tax returns that the business address for his

carpentry business was 618 Pack Hill Road. Mr. Finch and Ms. Raymer were co-borrowers on

the home equity line of credit against the Pack Hill Road property, which enabled them to buy

and sell more real estate in their partnership dealings. Considering all the circumstances, the
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court concludes that the parties’ conduct in regards to the Pack Hill Road residence was

consistent with that of co-owners and partners. The Court, thus, finds that it was the intention of

the parties that the Pack Hill Road property would be an asset of the partnership and not the

individual property of Ms. Raymer. Mr. Finch established through clear and convincing evidence

that the Pack Hill Road property was acquired for partnership purposes, although titled in Ms.

Raymer’s name alone. The trial court also found that the household items were purchased with

partnership funds combined with Mr. Finch’s income, and therefore, they were partnership

property. The only argument raised by the defendants is that property cannot qualify as

partnership assets when it is not held for sale or profit.

Conclusion: The appeals court found no merit in regards to the defendant’s sole argument of the

property and later affirmed the trial court’s ruling that the assets were partnership property

owned one-half by each partner.