Gertz v. Fontecchio, 68

• Decision Date: 05 September 1951
• Docket Number: No. 68,68
• Citation: 49 N.W.2d 121,331 Mich. 165
• Parties: GERTZ v. FONTECCHIO et al.
• Court: Michigan Supreme Court

Page 121

49 N.W.2d 121

331 Mich. 165

GERTZ v. FONTECCHIO et al.

No. 68.

Supreme Court of Michigan.

Sept. 5, 1951.

B. E. Larson, Ironwood, for plaintiff and appellant.

Leonard J. McManman and Ivan D. Wright, Ironwood, for defendants and appellees.

Before the Entire Bench.

DETHMERS, Justice.

Plaintiff and Herman Fontecchio, hereinafter called defendant, entered into a partnership agreement for the operation of an automobile repair and paint shop for an indefinite period of time. Plaintiff had money but no experience in such business. Defendant, a mechanic, had the necessary experience but no money. Accordingly, plaintiff purchased a going business of that character for $6,000. Under the partnership agreement his $6,000 investment was to be returned to him out of first profits, after which the partners were to share profits equally. Comformable with plaintiff's insistence that his interest in the business remain undisclosed, it was agreed that the business should be conducted under defendant's name only and a certificate of persons conducting business under an assumed name was filed with the county clerk representing defendant to be the sole owner. In furtherance of the scheme, after the partnership had been in operation for a number of months and plaintiff had already recovered out of first profits all but $1,204.17 of his investment, he transferred the business and its assets by bill of sale to defendant and, in accord with the partnership agreement, took back from defendant a chattel mortgage thereon in an amount equal to about half the value thereof. Plaintiff contributed no services to the partnership. As agreed, defendant contributed his services, managed, operated and kept the books of the partnership, for which, at the outset, he received an agreed salary of $45 per week. When plaintiff purchased the business it was located in a building upon which a three-year lease was then obtained, running to defendant as lessee, which provided for a monthly rental of $60, two three-year renewals upon the same terms, and an option to purchase, for an amount not specified, in the event the lessor desired to and should have an opportunity to sell the premises to another. Defendant immediately assigned a half interest in the lease to plaintiff. Later the lessor advised the parties that he desired to sell the building for $7,500 and would sell it to another if they did not buy. Plaintiff thereupon stated that he was not interested in buying, that he considered the property a poor investment at that price, that the parties could took into the matter of buying it later when the lease expired, that he had no objection to 'the business' purchasing it if defendant so desired, but that, as an individual, he was not interested. Thereafter, at a time when the lease was about to expire and when the time for exercising the option for a renewal had already passed without its having been exercised, defendant and wife bought the building for $7,500. When plaintiff learned of this he objected, contending that defendant could not purchase the building, and insisted that title be placed in the name of the partnership or, in the alternative, that defendants might retain title, collect a rental therefor of $75 per month and that defendant might receive an increase in salary from $45 to $65 per week on condition that defendants lease the premises to the partnership for ten years. It would appear that the latter was agreed upon but the lease was never executed although defendant did from that time on take the increase in salary and rent. Plaintiff claims that it was defendants' failure to execute such lease that occasioned the bringing of this suit for dissolution of the partnership. When this suit was brought the original lease had long since expired and there is no showing of any attempt by the partners or either of them to exercise the renewal option. The partnership agreement contained the following provision: '13. That if either of the partners shall be desirous of terminating the partnership at any time, the continuing partner shall have the privilege of taking the whole partnership business, at the rate at which the same shall be appraised and valued, on paying this value to the retiring partner.'

The trial court ordered dissolution under the quoted § 13 of the agreement and decreed defendant to be the owner of the business and all its assets upon payment to plaintiff of $8,709.53 comprising a $292.02 adjustment in plaintiff's favor of accounts between the parties and the partnership, a balance of $1,204.17 still due plaintiff on his original investment, $625 due plaintiff from the partnership on promissory notes, and a sum of $6,588.34 representing one half the value of the partnership business and assets as found by the court without regard to the value of rights of the partners or partnership under the lease which the court found to be non-existent.

Plaintiff appeals, claiming that the court erred (1) in dissolving the partnership under § 13 of the agreement instead of ordering a sale of the business and assets at public sale; (2) in failing to decree that the partnership owned the building or, in the alternative, to include the value of the proposed new ten-year lease in computing the total value of partnership assets; (3) in determining the amount due plaintiff on promissory notes; and (4) in failing to require defendant to account for and reimburse the partnership for the increased salary and rental drawn by him and profits derived by him from the purchase and sale of used cars which he repaired in the partnership place of business.

(1) Plaintiff contends that the provisions of § 13 of the agreement were intended to apply only to a friendly termination of the partnership and not where plaintiff has brought suit for dissolution alleging misconduct in the handing of partnership affairs by the defendant. In this connection plaintiff cites Steckroth v. Ferguson, 281 Mich. 279, 274 N.W. 792, quoting from the syllabus the following: 'Provisions of partnership agreement for...