## Facts

- Lewis obtained a long-term lease opportunity to build and operate a large cafeteria in Houston and sought capital from Collins.
- The parties agreed to operate as a 50/50 partnership: Collins would provide necessary funding; Lewis would supervise construction and manage operations for a salary.
- Collins advanced substantial funds for construction and start-up; project delays and cost overruns caused total expenditures to far exceed initial estimates.
- After opening, the cafeteria’s expenses exceeded receipts and the business struggled financially.
- Collins complained of mismanagement, threatened to stop funding, and interfered with management despite the parties’ allocation of operational control to Lewis.
- Collins sued seeking appointment of a receiver, judicial dissolution, and foreclosure of a mortgage on Lewis’s partnership interest securing Collins’s advances.
- A jury found Lewis competent to manage and found a reasonable expectation of profit absent Collins’s interference, which decreased first-year earnings.

## Issues

1. Whether a partner is entitled to judicial dissolution based on unprofitability and partner disagreement when the petitioner’s own interference caused the business’s difficulties and the managing partner is competent.
2. Whether the capital partner may foreclose a mortgage on the managing partner’s partnership interest when the repayment obligation is structured to be paid from partnership revenues and no contractual default is shown.

## Decision

- The appellate court affirmed judgment for Lewis and denied all relief sought by Collins.
- Dissolution was denied because the evidence and jury findings supported that the venture could succeed under the agreed management structure and that Collins’s conduct materially caused the claimed breakdown and losses.
- Foreclosure was denied because the repayment arrangement was tied to partnership earnings and the record did not establish a present default under the parties’ agreement.

## Legal Principles

- Judicial dissolution is an equitable remedy and may be denied when the requesting partner’s own breach or misconduct is the primary cause of the partnership’s distress.
- A partner cannot obtain dissolution as an exit mechanism where the partners remain capable of performing their contractual roles and there is a reasonable expectation of future profitability.
- Courts enforce agreed allocations of partnership responsibilities (capital provision versus managerial control) and will not reassign those risks through equitable relief due to early unprofitability.
- Foreclosure on a partner’s interest requires a contractual basis for default; repayment obligations payable from partnership earnings do not support foreclosure absent a current default under the agreed terms.

## Conclusion

The court refused to dissolve the partnership or permit foreclosure because the managing partner was found competent and the business’s early losses and conflict were attributable chiefly to the capital partner’s interference, while repayment obligations were structured to be satisfied from partnership revenues without a shown default.


Collins v. Lewis, 283 S.W.2d 258 (Tex. Civ. App.—Galveston 1955)