Fairway Development v. Title Ins. Co. of Minnesota

Title Insurance Company of Minnesota (defendant) sold title insurance to Fairway Development (plaintiff), a partnership, consisting of three partners: Thomas Bernabei, James Serra, and Howard Wenger. The partners contributed capital and shared in the profits of the company equally. Defendant contends that the partnership (Fairway Development I) dissolved when Bernabei and Serra sold and transferred their interest in the partnership and that a new partnership resulted, Fairway Development II. The plaintiff argued that the Court should focus on the intent of the parties and that Fairway Development II carried on the stated purpose of Fairway Development I.

"It is universally admitted that any change in membership dissolves a partnership and creates a new partnership." Thus, the Court held that a new partnership emerged and the partnership ceased when the membership of the partnership changed. NOTE: This is no longer good law in many jurisdictions. The Revised Uniform Partnership Act states that "A partnership is an entity." Under the entity theory, the partnership continues despite change in membership. This is a change from previous notions of partnership composition, which treated partnerships as "aggregate," meaning that the partnership was merely a collection of individuals with no separate existence. In this case, the court applied the aggregate view and held that a new partnership had been created when the membership of the previous changed.

Partnerships & Relatives | Aggregate or Entity