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Owen v. Cohen | 119 P.2d 713 (1941)

A partnership may be dissolved at any time by operation of law and without resort to the courts, or by a judicial order, when a partner’s conduct prejudicially affects the carrying on of the business. In the 1941 case Owen versus Cohen, the Supreme Court of California considered whether a partner could obtain a judicial dissolution of a partnership to operate a bowling alley.

On January 2nd, 1940, Ross Owen and Israel Cohen orally agreed to operate a bowling alley as partners in Burbank, California. Pursuant to the agreement, Owen loaned the partnership roughly $7,000 for the purchase of equipment. Owen and Cohen also agreed that the $7,000 would be paid back once the business became profitable. At the time, Cohen owned an undivided one-half interest in a bowling alley, and the partnership agreed to purchase the other one-half interest.

On March 15th, 1940, Owen and Cohen opened the bowling alley, which was profitable for about three-and-a-half months. During this time, the partners continued to pay off their debts and each took a salary of $50 per week. But shortly afterward, Owen and Cohen started to disagree on how to manage the bowling alley, and their rights and duties under the oral agreement.

Cohen wanted to open up a gambling room in the bowling alley, which Owen opposed. In addition, Cohen wanted to take more than $50 per week in salary and started taking small sums from the business without Owen’s knowledge, approval, or consent. Cohen also insisted on being the dominant partner and was openly hostile toward Owen in front of customers and employees.

As a result of the constant bickering, the bowling alley lost customers and became less profitable. Owen then asked Cohen to either buy Owen out of the business or to sell his interest in the business to Owen. Cohen refused to reasonably entertain either option and said he would sell his interest in the partnership to Owen when he was ready to and that he’d set the price himself.

Subsequently, Owen sued Cohen in superior court and sought a judicial dissolution of the partnership and a sale of the partnership’s assets. Following trial, the court found that Cohen breached the partnership agreement and that it wasn’t reasonably practicable to carry on the business. As a result, the court ordered dissolution of the partnership and sale of the partnership’s assets by an appointed receiver. Cohen appealed the decision to the California Supreme Court.

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