Business Associations, Pages 148–155

Cheesecake Factory, Inc. v. Baines

Court of Appeals of New Mexico, 1998


Plaintiff extended credit to Triples American Grill because it thought it thought that it was owned by a partnership with defendant as a member, but it was instead owned by a corporation. Plaintiff then sued defendant as a partner by estoppel

Procedural History:

Trial court entered a judgment against defendant.


Was defendant a partner by estoppel?


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[A] person can be treated as a partner, and consequently exposed to personal liability for the corporation's debts, when representations are made that the enterprise is a partnership and the person is a partner. The representations must be made by the purported partner or with the purported partner's consent. . . . "If the representation is privately made, it may be taken advantage of only by persons to whom it was made; if it was publicly made, anyone (roughly speaking) can make use of it."

. . . . When a representation is private, the statute explicitly requires the claimant to establish that it "has on the faith of such representation, given credit to the actual partnership."

Plaintiff's Argument:

No such reliance is necessary if the representations are made "in a public manner."


  • LexisNexis IconWestLaw LogoGoogle Scholar LogoPage 151

    [R]ecognizing estoppel without reliance would be a sharp departure from firmly grounded common-law principles. The foundation of estoppel is that one is bound by saying or doing something upon which another relies to his or her detriment.

  • The statute's language also suggests that reliance is still required when made in a public manner. This also makes the most sense, as there is no reason for public representations to be different, and one who consents to a public announcement that he is a partner can expect others to hear and rely upon this.

  • Defendant must have also consented to being represented as a partner. While no evidence directly shows this, it is implied. A bank account was opened in defendant's name as "owner" of Triples American Grill, and a payroll account was opened similarly. Defendant was often in the business office of the bar, making employees believe that he was a partner. Testimony stated that defendant had told people that "he had a sports bar" and "was a partner" in it. In light of this evidence, it was reasonable to infer that defendant consented to being represented as a partner to plaintiff.

  • Finally, plaintiff relied on the purported partnership. Its president testified that it was only willing to extend credit because it was a partnership, specifically because liability runs to the individual partners. Even if he did not do a credit check on defendant, merely having a second person provides some comfort to creditors. People personally liable are usually more careful with their businesses, and the business only owed $20,000—an amount which could be expected to be paid off mostly by a business owner. The test for reliance does not require the decision to have been good business practice. Many factors can go into such a decision, and having defendant as a partner was reasonably included among these. Thus, plaintiff relied on this purported fact.


Yes, defendant was a partner from estoppel and is thus estopped from asserting otherwise to plaintiff. Affirmed.