Brooks v. Rose, Docket Nos. 115963
| Decision Date | 21 October 1991 |
| Docket Number | 116745,Docket Nos. 115963 |
| Citation | 191 Mich.App. 565,478 N.W.2d 731 |
| Parties | Marvin BROOKS and Sanford Layne, Plaintiffs-Counter Defendants-Appellees, v. David ROSE and Sydney Rose, Defendants-Counter Plaintiffs-Appellants. Marvin BROOKS and Sanford Layne, Plaintiffs-Counter Defendants-Appellees-Cross-Appellants, v. David ROSE and Sydney Rose, Defendants-Counter Plaintiffs-Appellants-Cross Appellees. |
| Court | Court of Appeal of Michigan — District of US |
Bruce O. Wilson and Kerney & Heldt by Jeffrey A. Heldt, Birmingham, for plaintiffs and counter defendants.
Dykema Gossett by Craig L. John, Bloomfield Hills, for defendants and counter plaintiffs.
Before GRIFFIN, P.J., and REILLY and BURNS, * JJ.
Following a bench trial, defendants, David Rose and Sydney Rose, were awarded $13,998.73 on their countercomplaint against plaintiffs, Marvin Brooks and Sanford Layne. Defendants appeal as of right, claiming they were entitled to additional damages. Plaintiffs cross appeal, claiming that defendants were improperly awarded attorney fees as an element of damages. We affirm in part and reverse in part.
In June 1983, David Rose met with Sanford Layne regarding the proposed development of a shopping center and office building complex on property in Kentwood, Michigan. Rose presented Layne with various informational materials that he had compiled regarding the feasibility of such a project and advised Layne that the real estate could be purchased at a favorable price. On August 15, 1983, Layne, along with his business associate, David Brooks, and Sydney Rose, who was David Rose's wife, executed a "letter of understanding" outlining the basis for a partnership to develop and manage a shopping and office complex on the Kentwood property. Pursuant to this letter, Brooks, Layne, and Sydney Rose agreed to form a partnership in which Brooks and Layne would each have a twenty-five percent interest and Sydney Rose a fifty percent interest. Brooks and Layne were to purchase the Kentwood property and serve as general contractors for the project. Sydney Rose was to receive a $125,000 "assembly fee," payable in three installments on the occurrence of certain contingencies. 1 Further, Sydney Rose was given the exclusive right to serve as leasing agent for the retail space for a period of one hundred days commencing on the date an offer to purchase was accepted. If, after one hundred days, the retail space was not leased in a reasonable manner satisfactory to Brooks and Layne, then Brooks and Layne had the option of obtaining an outside broker to handle the remaining leasing, subject, however, to Rose's right to approve the compensation for the broker. Each of the three partners, along with David Rose, also executed a separate agreement in which it was specified that David Rose was to perform all the obligations required to be performed by Sydney Rose pursuant to the terms of the letter of understanding.
In accordance with the letter of understanding, an offer to purchase the subject property for $1,300,000 was submitted by Brooks and Layne, in their individual names, and accepted by the seller on September 29, 1983. David Rose then began pursuing lessees for the proposed project. However, when the period of Sydney Rose's exclusive leasing rights ended on January 7, 1984, not a single tenant had been attracted. Consequently, on January 9, 1984, without the Roses' knowledge, Brooks and Layne met with real estate agents William Lakritz and Sanford Weber and made a verbal commitment to give them a thirty-five percent equity interest in the partnership in return for their services in locating tenants. Brooks and Layne then met with David Rose on January 11, 1984, informing him that they wanted Lakritz and Weber included in the partnership on a thirty-five percent equity basis, with twenty percent coming from Sydney Rose's interest. Rose insisted that any equity percentage come equally from the two sides. Brooks and Layne refused, and the parties were unable to resolve the issue regarding compensation.
As a result, on January 13 and 16, 1984, Brooks and Layne sent telegrams to the Roses, informing them that they were terminating their business relationship. 2 The Roses responded with a telegram of their own on January 17, announcing that they were willing to consider alternative arrangements for the compensation of the leasing agents, but were not willing to change control of the partnership. Brooks and Layne then advised the Roses that they were going to proceed with the development of the property without them and, on January 19, 1983, executed an amendment to the purchase agreement without the Roses' knowledge or consent. The amendment extended the closing date for the purchase of the Kentwood property from February 11 to May 25, 1984, removed certain contingencies, and changed the refundable $75,000 deposit to a $50,000 non-refundable one.
On February 14, 1984, Brooks and Layne commenced a declaratory judgment action, seeking a declaration that Sydney Rose was no longer a partner, as well as the court's guidance with respect to the rights of the parties. The Roses counter-sued for damages, claiming that Brooks and Layne wrongfully breached the partnership agreement.
As it turned out, Brooks and Layne did not consummate the purchase of the Kentwood property, and they lost their $50,000 deposit. The Roses, however, were able to form a new partnership, which successfully purchased the Kentwood property on December 13, 1984, for $1,350,000 dollars.
Following a bench trial in December 1988, the trial court determined that a valid partnership consisting of Brooks, Layne and Sydney Rose arose pursuant to the parties' actions and undertakings in accordance with the duties and obligations set forth in the August 15, 1983, letter of understanding. The trial court found that the sole asset of the partnership was the right to purchase the Kentwood property pursuant to the September 29, 1983, purchase agreement. The trial court further found that Brooks and Layne, before amending the purchase agreement to the exclusion of Sydney Rose, advised David Rose that they were going to proceed with the development of the Kentwood property without Sydney Rose, that they did not care what the Roses decided to do, and that if the Roses did not like what was happening, they could sue. The trial court determined that, through these actions, Brooks and Layne breached their fiduciary duty owed to Sydney Rose as a partner and improperly terminated the partnership. The trial court awarded the Roses damages in the amount of $37,081.25 for expenses incurred in protecting Sydney Rose's opportunity to purchase the Kentwood property. 3 This appeal followed.
The findings of fact in a bench trial will not be set aside by an appellate court unless they are clearly erroneous. MCR 2.613(C); Rellinger v. Bremmeyr, 180 Mich.App. 661, 665, 448 N.W.2d 49 (1989). Appellate courts must give regard to the trial court's superior ability to judge the credibility of the witnesses who appeared before it. Id.
The plaintiffs contest the trial court's award of damages, claiming that damages are not recoverable in an action involving termination of a partnership. We find no merit to this claim.
The trial court found, and we agree, that the plaintiffs caused a dissolution of the partnership in contravention of the agreement between the partners. M.C.L. Sec. 449.31(2); M.S.A. Sec. 20.31(2). M.C.L. Sec. 449.38(2)(a)(II); M.S.A. Sec. 20.38(2)(a)(II), explicitly provides that when dissolution is caused in contravention of the partnership agreement, each partner who has not wrongfully caused dissolution has a right to damages for breach of the agreement against each partner who wrongfully caused the dissolution. Also see Gilroy v. Conway, 151 Mich.App. 628, 637, 391 N.W.2d 419 (1986).
We now turn to consideration of the defendants' issues on appeal. First, defendants claim that the trial court erred when it found that Sydney Rose was not entitled to the $125,000 assembly fee. We disagree.
Defendants do not dispute the trial court's finding that Sydney Rose's entitlement to the $125,000 assembly fee was controlled by the terms of the letter of understanding. Although the assembly fee was to be paid in three installments, the plaintiffs' ultimate liability to pay the fee was conditioned upon their consummation of the purchase of the Kentwood property. Pursuant to the letter of understanding, if the plaintiffs failed to consummate the purchase "for any reason," they would be relieved of their liability to pay Sydney Rose the assembly fee, and those fee installments previously paid would have to be returned to the plaintiffs.
Here, the trial court announced it was not awarding Sydney Rose the assembly fee because she failed to prove by a preponderance of the evidence that the plaintiffs' wrongful conduct prevented her from "earning" the fee and because she failed to show any attempt to mitigate her damages by negotiating the same provisions in the second partnership agreement.
With regard to the trial court's finding relative to mitigation, it appears that the trial court erred in placing the burden of proving mitigation on Sydney Rose. Instead, the burden was on the plaintiffs, who were counterdefendants with respect to the claim involving the assembly fee, to prove that Sydney Rose failed to use reasonable efforts to mitigate her damages. McCullagh v. Goodyear Tire & Rubber Co., 342 Mich. 244, 255, 69 N.W.2d 731 (1955). Nevertheless, the error does not warrant reversal.
As noted above, consummation of the purchase of the...
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