In 1991, Mario Smith and Luigi Joseph signed a lease for 3960 South State Street in Philadelphia, Pennsylvania. Joseph paid $6,000 for the first and last month's rent, and said to Smith, “We are in this together, partner.” Smith bought business cards for “Perfect Auto” with his and Joseph’s names on the cards. Both men were listed on Perfect Auto’s insurance policy. Smith bought the firm’s furniture. Joseph did the bookkeeping and bought the inventory. Smith did not have access to the books but wrote checks on the firm’s account, sold its inventory, and managed the sales staff. In March 1993, Joseph gave Smith a check for $10,000. Otherwise, Smith was paid a fixed amount each month. Later that year, without telling Smith, Joseph bought the leased property with the firm’s funds but titled it in his name. In 1995, Smith learned of this deal and confronted Joseph, who said, “Don’t worry, we’re partners.” Joseph filed the firm’s tax returns in his name only, despite Smith’s repeated objections. Finally, in 1997, Smith quit the firm and filed a suit in a Pennsylvania state court against Joseph to dissolve the partnership and obtain a share of the profits.
1) What factors indicate that Smith and Joseph were partners? What factors indicate that they were not partners? If you were the judge, how would you resolve this dispute?
2) Is Smith entitled to a share of the value of the real property that Joseph bought in his own name? If so, how much? From an ethical point of view, what solution appears to be the fairest? Discuss.
3) Is Smith entitled to a share of Perfect Auto’s profits? Why or why not?