Zeibak v. Nasser
1938 Cal. LEXIS 360, 12 Cal.2d 1, 82 P.2d 375 (1938)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
The rights and liabilities of joint venturers as between themselves are governed by the same legal principles that apply to partnerships. Consequently, a statutory provision allowing non-breaching partners to continue the business after a wrongful dissolution applies equally to members of a joint venture.
Facts:
- In late 1931, Zeibak, the Nasser brothers (Nasser), and L. G. Dolliver entered into an oral joint venture agreement to acquire and operate three theaters in San Francisco.
- The parties agreed Zeibak would own a 50% interest, Dolliver 20%, and the Nassers 30%, with the Nassers having exclusive management rights.
- They also agreed to form a corporation to operate the theaters after acquiring them.
- On February 1, 1932, the venture acquired the theaters, but disputes arose almost immediately over management and operations.
- The parties failed to form the planned corporation because they could not agree on the final terms.
- After months of negotiations, all parties orally agreed to a proposed final agreement, which Zeibak signed in October 1932 and the Nassers signed in November 1932.
- On or about December 11, 1932, Zeibak refused to exchange the executed copies of the agreement, effectively preventing its finalization.
- Zeibak also refused to contribute his share to cover a business deficit and did not cooperate with agreed-upon plans for theater repairs.
Procedural Posture:
- Zeibak (plaintiff) filed an action in a California trial court against the Nassers and Dolliver (defendants) for dissolution of the joint venture and an accounting.
- The defendants filed a cross-complaint, asserting that Zeibak had wrongfully caused the dissolution and asking the court for the right to continue the business by paying Zeibak the value of his interest under Civil Code § 2432.
- During the trial, defendant L. G. Dolliver died, and his special administratrix was substituted as a party.
- The trial court found that Zeibak had wrongfully caused the dissolution of the joint venture by his conduct.
- The trial court entered a judgment dissolving the venture as of July 20, 1934, and ordering the defendants to pay Zeibak the value of his one-half interest, excluding goodwill, and to indemnify him against liabilities.
- Both Zeibak (plaintiff-appellant) and the Nassers (defendants-cross-appellants) appealed from the final judgment to this appellate court.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does California Civil Code § 2432, which allows partners who did not wrongfully cause a dissolution to continue the business and buy out the wrongful partner's interest without including goodwill, apply to a joint venture?
Opinions:
Majority - The Court
Yes, the statutory rules for partnership dissolution, including the remedy for wrongful dissolution, apply to joint ventures. The rights and liabilities of joint venturers are governed by the same principles that apply to partnerships. The court found substantial evidence that Zeibak's conduct, including his refusal to finalize the agreement and cooperate in the business, was willful, persistent, and wrongfully caused the dissolution in contravention of the venture's agreement. The court rejected Zeibak's argument that the venture was terminable at will, finding an implied term of duration tied to the theater leases and that it was for a 'particular undertaking'—operating the theaters. Therefore, the defendants, as the non-breaching parties, were entitled under Civil Code § 2432 to continue the business and purchase Zeibak's interest without including the value of the business's goodwill.
Analysis:
This decision solidifies the legal doctrine in California that joint ventures are treated as partnerships for determining the rights and liabilities of their members. It establishes that the statutory remedies for wrongful dissolution under the Uniform Partnership Act are not limited to formal partnerships but extend to joint ventures, providing stability and a clear remedy for the non-breaching parties. The ruling protects ongoing business enterprises from being destroyed by the wrongful conduct of one member, allowing the remaining members to preserve the going-concern value of the business by buying out the breaching party without paying a premium for goodwill.
