law-totality-of-the-circumstances
TOTALITY-OF-THE-CIRCUMSTANCES "TEST"
Ingram v. Deere, No. 06-0815 (Tex. Jul 3, 2009)(Wainwright)(dispute over existence of partnership under
TRPA, partnership criteria/factors, fiduciary duty) (existence of partnership not proven, take-nothing
judgment reinstated)
JESSE C. INGRAM, PH.D. AND BEHAVIORAL PSYCHOLOGY CLINIC, P.C. v. LOUIS DEERE, D.O. AND
HILLVALE MEDICAL GROUP ASSOCIATION D/B/A HILLVALE MEDICAL ASSOCIATION; from Dallas County;
5th district (05-05-00063-CV, 198 SW3d 96, 04-27-06 Opinion of the Dallas court of Appeals)
2 petitions
The Court reverses the court of appeals' judgment and reinstates the trial court's judgment.
Justice Wainwright delivered the opinion of the Court, in which Chief Justice Jefferson, Justice Hecht, Justice
Medina, Justice Green, and Justice Willett joined, in which Justice O'Neill and Justice Brister joined except
as to part II.D.5.a, and in which Justice Johnson joined except as to part II.D.2. [pdf]
Justice Johnson delivered a concurring opinion. [pdf]
While proof of all five common law factors was a prerequisite to partnership formation under the common
law, the totality-of-the-circumstances test was, in some respect, foreshadowed in Texas case law. As Justice
Jack Pope wrote for the San Antonio Court of Appeals,
No single fact may be stated as a complete and final test of partnership. Each case must rest on its own
particular facts and the presence or absence of the usual attributes of a partnership relation. The earlier
Texas rule indicated that profit sharing was the controlling test. We think it is now generally held that such a
test is not all-inclusive and controlling . . . . The absence of an express provision obligating the parties to
share in the losses is also important and indicates that no partnership existed. But this feature too is not
controlling.
Davis v. Gilmore, 244 S.W.2d 671, 673–74 (Tex. Civ. App—San Antonio 1951, writ ref’d) (citations omitted).
Many states apply this totality-of-the-circumstances test.8
We note the difficulty of uniformly applying a totality-of-the-circumstances test, see Perry Homes v.
Cull, 258 S.W.3d 580, 592 (Tex. 2008) (explaining the difficulty of applying a totality-of-the-circumstances
test in determining whether a party waived an arbitration clause in a contract), but we cannot ignore the
Legislature’s decision to codify the essential common law partnership factors in TRPA without specifying
that proof of all or some of the factors is required to establish a partnership. See Tex. Rev. Civ. Stat. art.
6132b-2.03; In re M.N., 262 S.W.3d 799, 802 (Tex. 2008) (explaining that courts presume that the
Legislature included each word in the statute for a purpose and that words not included were purposefully
omitted). Yet, we can provide additional guidelines for this analysis. Of course, evidence of none of the
factors will preclude the recognition of a partnership under Texas law. Cf. Schlumberger Tech. Corp. v.
Swanson, 959 S.W.2d 171, 176 (Tex. 1997) (applying TUPA). Even conclusive evidence of only one factor
normally will be insufficient to establish the existence of a partnership.9 To hold otherwise would create a
probability that some business owners would be legally required to share profits with individuals or be held
liable for the actions of individuals who were neither treated as nor intended to be partners. See Tex. Rev.
Civ. Stat. art. 6132b-3.03(a) (explaining that a partnership is liable for the acts of a partner done with
authority or in the ordinary course of the partnership’s business); see also Kao Holdings, L.P. v. Young,
261 S.W.3d 60, 63 (Tex. 2008). The Legislature does not indicate that it intended to spring surprise or
accidental partnerships on independent business persons, if, for example, an employee is paid out of
business profits with no other indicia of a de facto partnership under TRPA. On the other end of the
spectrum, conclusive evidence of all of the TRPA factors will establish the existence of a partnership as a
matter of law. The challenge of the totality-of-the-circumstances test will be its application between these
two points on the continuum.
Perry Homes v. Cull, No. 05-0882, 258 S.W.3d 850 (Tex. May 2, 2008)(Opinion by Scott A. Brister)
(arbitration award in favor of consumers overturned; court says home owners implicitly waived right to
arbitrate by their litigation conduct)
05-0882 PERRY HOMES, A JOINT VENTURE, HOME OWNERS MULTIPLE EQUITY, INC., AND WARRANTY
UNDERWRITERS INSURANCE COMPANY v. ROBERT E. CULL, AND S. JANE CULL; from Tarrant County;
2nd district (02-04-00052-CV, 173 S.W.3d 565, 08-31-05)
The Court reverses the court of appeals' judgment, vacates the arbitration award, and remands the case to
the trial court.
Justice Brister delivered the opinion of the Court, in which Justice Hecht, Justice O'Neill, Justice Wainwright,
and Justice Medina joined, and in which Chief Justice Jefferson, Justice Green, Justice Johnson, and Justice
Willett joined as to parts I-V.
Justice O'Neill delivered a concurring opinion.
Justice Johnson wrote an opinion concurring and dissenting in part, which was joined by Chief Justice Jefferson and Justice
Green
Justice Willett delivered an opinion concurring in part and dissenting in part.
Opinion below: Perry Homes v. Cull, 02-04-00052-CV, (Tex.App.- Fort Worth, Aug 31, 2005, pet . filed)(reversed, and
arbitration award for home owners vacated)