In re Twin Oaks Golf Course
| Decision Date | 07 January 1982 |
| Docket Number | Bankruptcy No. NL 81-02758,Adv. No. 81-0824. |
| Parties | In re TWIN OAKS GOLF COURSE, a Partnership, Debtor. Gaylord CROWELL and Geraldine Crowell, Plaintiffs, v. TWIN OAKS GOLF COURSE, Defendant. |
| Court | U.S. Bankruptcy Court — Western District of Michigan |
Dickinson, Wright, McKean, Cudlip & Moon, Peter S. Sheldon, Lansing, Mich., for plaintiffs.
Glassen, Rhead, McLean & Campbell, R.F. Rhead, Lansing, Mich., for defendant.
PARTNERSHIP—BANKRUPTCY— QUALIFICATION TO BE A BANKRUPT
On July 8, 1981, a voluntary petition under Chapter 11, Title 11 of the United States Code, was filed by Twin Oaks Golf Course. This action is before the Court on the petition of Gaylord Crowell and Geraldine Crowell, husband and wife (Crowells) to vacate the order for relief and dismiss debtor's voluntary petition. It is the claim of Crowells that Twin Oaks Golf Course is not a partnership and therefore has no right to file a petition for an order for relief. Twin Oaks contends that it is a partnership.
On February 2, 1979, a contract of sale was entered into between Crowells as vendors and Earl Beachum and Maxine Beachum (Beachums) as vendees. Under this agreement, Beachums agreed to purchase all the assets of a business known as Twin Oaks Golf Course for a total of $60,000.00. Seperate bills of sale for inventory, pro shop equipment and fixtures were executed to the Beachums, "husband and wife." Beachums executed a promissory note to Crowells secured by assets used in the operation of Twin Oaks. Real estate consisting of the golf course and club house was sold for $223,000.00 on a land contract. The land contract was executed on March 29, 1979, to "Earl Beachum and Maxine Beachum, husband and wife."
At the time of the sale, Crowells explained to Beachums their method of operating the golf course, suggesting that it would have to be run as a husband and wife business. At Crowell's suggestion Beachums followed the same procedure. The wife would run the snack bar and order supplies. The husband would oversee the watering and maintenance of the course. The Beachums worked together closely. They assumed the business was a partnership although they never used the term "partnership."
Partnerships have been recognized throughout legal history and existed under classical Roman law. Yet, over the centuries, courts have had difficulty in agreeing on a clear definition or concept of a partnership. In 1917, Michigan adopted the uniform partnership act. After amendments in 1941 and 1957, a partnership is defined in Section 6 of the Act, Mich.Comp. Laws § 449.6 Mich.Stat.Ann. § 20.6 (Callaghan 1975).
For the purpose of this case, the definitions of a partnership under recent common law do not appreciably differ from the Statute. In Petition of Williams, 297 F. 696 (1st Cir., 1924) cert. den. 265 U.S. 593, 44 S.Ct. 638, 68 L.Ed. 1197 (1924), in an involuntary petition for the adjudication of a partnership as a bankrupt, one of the alleged partners denied that he was a partner. At page 702 the Court said, "It has been said, and no doubt wisely, that it is not prudent to define a partnership; but there are certain things generally recognized as essential which may be stated * *." The Court then continued that these "essential things" were never better stated than by Justice Cooley in Beecher v. Bush, 45 Mich. 188, 7 N.W. 785 (1881). At page 200, 7 N.W. 785, Justice Cooley, speaking for the Court stated:
"* * enough (cases) are cited to show that in so far as the notion ever took hold of the judicial mind that the question of partnership or no partnership was to be settled by arbitrary tests it was erroneous and mischievous, and the proper corrective has been applied. Except when one allows the public or individual dealers to be deceived by the appearances of partnership when none exists, he is never to be charged as a partner unless by contract and with intent he has formed a relation in which the elements of partnership are to be found. And what are these? At the very least the following: Community of interest in some lawful commerce or business, for the conduct of which the parties are mutually principals of the agents for each other, with general powers within the scope of the business, which powers however by agreement between the parties themselves may be restricted at option to the extent even of making one the sole agent of the others and of the business.
Cases decided under Michigan law have generally followed Justice Cooley's test as expanded by the Statute. Commissioner of Internal Revenue v. Olds, 60 F.2d 252 (6th Cir., 1932); Bankers Trust Co. v. Bradfield, 324 Mich. 116, 36 N.W.2d 870 (1949); Moore v. Du Bard, 318 Mich. 578, 29 N.W.2d 94 (1947); Lobato v. Paulino, 304 Mich. 668, 8 N.W.2d 873 (1943); Rodgers v. Lincoln Hospital, 239 Mich. 329, 214 N.W. 88 (1927); Folks v. Burletson, 177 Mich. 6, 142 N.W. 1120 (1913); Carpenter v. Lennane, 166 Mich. 610, 132 N.W. 477 (1911); Brotherton v. Gilchrist, 144 Mich. 274, 107 N.W. 890 (1906); Canton Bridge Co. v. City of Eaton Rapids, 107 Mich. 613, 65 N.W. 761 (1895); Dutcher v. Buck, 96 Mich. 160, 55 N.W. 676 (1893); Miller v. City Bank & Trust Co., 82 Mich.App. 120, 266 N.W.2d 687 (1978); Maynard v. Dorner, 56 Mich.App. 7, 223 N.W.2d 338 (1974); Falkner v. Falkner, 24 Mich.App. 633, 180 N.W.2d 491 (1970).
I can find no basis for finding that a partnership does not exist in this case. Looking first to the Statute, we have (1) an association of two persons (2) who happen to be husband and wife (3) formed to carry on as co-owners (4) a business for profit. Looking to the test of Justice Cooley, there is here (1) a contract—while there is no written contract, there was certainly an understanding (2) an intent by the husband and wife to act as a partnership (3) a community of interest (4) lawful commerce or business (5) the parties conducting the business as mutual principals of and agents for each other.
Since the Uniform Partnership Act first permitted a husband and wife to become partners in the same partnership, three cases involving husband and wife partnerships have come before the Michigan Courts. In Socony-Vacuum Oil Co., Inc. v. Texas Co., 113 F.Supp. 514 (E.D.Mich., 1953), Judge Picard held that while a husband and wife could be partners in the same partnership, they could not be the sole partners. As a result of this case, Section 6 of the act was amended in 1957, Public Acts of 1957, No. 59.
In Maynard v. Dorner, 56 Mich.App. 7, 223 N.W.2d 338 (1974), in a complaint against a husband and wife, the Court affirmed the finding that the husband and wife were partners by estoppel. The lower Court found that they operated the business as a husband and wife team, had a common interest in the business, used firm bank accounts, and commingled funds and property. The Court also found that the wife participated in affairs of the business. The Court of Appeals did not find these findings to be clearly erroneous.
Crowells rely on Miller v. City Bank and Trust Co., 82 Mich.App. 120, 266 N.W.2d 687 (1978), in which a widow filed a complaint against the executor of her deceased husband's estate for a declaratory judgment that there was a business partnership between her and her deceased husband. The trial court found that plaintiff did not carry the burden of proof in establishing a partnership. This decision was affirmed. The facts in Miller were unique. In 1959, Mrs. Miller met and married Mr. Miller, left a good position in Baltimore and moved to Jackson, where she helped her husband in his established nursery. She made no capital contribution but held a management position, kept books and hired and fired employees. In 1960 a "business registration certificate" was filed indicating a partnership. However, tax returns indicated that the business was a...
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