955 P.2c 997 (1998)
P and D are two groups of partners, who entered into an written agreement to create a fishing lodge. The concept between the two groups would be a 50-50 partnership, but not necessarily in the amount of equity invested into the business at the outset. D, instead of providing 50% equity, would provide “sweat equity” in the form of constructing and managing the lodge in the first year. P claims they “never knowingly acquiesced in such an arrangement.” P claims they did not read the document because it represented by D as a “mere formality.” Moreover, P does not read the document to actually mean that D is to be compensated for his sweat equity. After other issues related to accounting and botched construction, D terminated the partnership and wanted out.
The partially built lodge and land receive an offer for purchase from a 3rd party and P wants half of the proceeds, per the agreement.
Whether P is entitled to half of the proceeds from sale, via the partnership agreement that supposedly provides “sweat equity” as a replacement for 50% financial equity.
Not sure because the trial court didn’t address the issue, remanded for retrial. The trial court did not state whatsoever whether it found “express or implied agreement between the partners to treat (D’s) architectural and managerial services as capital contributions…”
Since this is an appeal, the appellate court found no way of determining whether the trial court’s finding of fact related to the agreement was “clearly erroneous.”
The rule in Alaska has been that sweat equity does create a right for a partner to share in profits of the partnership business. Moreover, in “certain circumstances” sweat equity counts as a “capital contribution.” However, in the absence of an agreement stating sweat equity is replacing financial equity, the “partner contributing only personal services is ordinarily not entitled to any share of partnership capital pursuant to dissolution.” Alaskan statute makes this clear.