McKee v. Gilbert

• Decision Date: 23 March 1983
• Docket Number: No. A8011-06240,A8011-06240
• Citation: 62 Or.App. 310,661 P.2d 97
• Parties: Douglas L. McKEE, Richard E. Cohn, and Fred M. Murrell, Appellants, v. Kerry S. GILBERT, Properties Personnel, Inc., an Oregon corporation, Paul E. Christensen, Allan R. Pike, David P. Weiner, Stanley M. Samuels, Rosalie B. Gilbert, George L. Campf, Frederic G. Wessinger, William Garnjobst, James D. Hurst, Richard Herrera, Warren H. Ashmann, Joseph Harel, Hyman Evans, Lilly Evans, and N. Dickson Davis, Respondents. ; CA A23585.
• Court: Oregon Court of Appeals

Page 97

661 P.2d 97

62 Or.App. 310

Douglas L. McKEE, Richard E. Cohn, and Fred M. Murrell, Appellants, v. Kerry S. GILBERT, Properties Personnel, Inc., an Oregon corporation, Paul E. Christensen, Allan R. Pike, David P Weiner, Stanley M. Samuels, Rosalie B. Gilbert, George L Campf, Frederic G. Wessinger, William Garnjobst, James D Hurst, Richard Herrera, Warren H. Ashmann, Joseph Harel Hyman Evans, Lilly Evans, and N. Dickson Davis, Respondents.

No. A8011-06240; CA A23585.

Court of Appeals of Oregon.

Argued and Submitted Oct. 13, 1982.

Decided March 23, 1983.

Paul R. Meyer, Portland, argued the cause for appellants. With him on the briefs were Jan D. Sokol and Kobin & Meyer, P.C., Portland.

Frederick T. Smith, Portland, argued the cause for respondents Kerry S. Gilbert, Properties Personnel, Inc., an Oregon Corp., Paul E. Christensen, Allan R. Pike, David P. Weiner, Stanley M. Samuels, Rosalie B. Gilbert, George L. Campf, Frederic G. Wessinger, William Garnjobst, James D. Hurst and Richard Herrera. With him on the brief was David D. Park, Portland.

Jeffrey M. Batchelor, Portland, argued the cause for respondents Warren H. Ashmann and Joseph Harel. With him on the brief were George L. Kirklin and Spears, Lubersky, Campbell & Bledsoe, Portland.

Lawrence I. Evans, Portland, waived appearance for respondents Hyman Evans and Lilly Evans.

Morton H. Zalutsky and Zalutsky & Klarquist, P.C., Portland, waived appearance for respondent N. Dickson Davis.

Before RICHARDSON, P.J., JOSEPH, C.J., ^* and VAN HOOMISSEN, J.

RICHARDSON, Presiding Judge.

Plaintiffs brought an action to rescind a sale agreement and for other relief based on allegations of unauthorized actions and breaches of fiduciary duties by partners. The parties filed cross-motions for summary judgment; plaintiffs appeal orders granting defendants summary judgment, denying them summary judgment and dismissing their complaint. ¹ We conclude that summary judgment for defendants was improperly granted.

Three partnerships are involved in the suit. One partnership, known as "APTS," was formed by Murrell, one of the three plaintiffs, and defendants Gilbert and Properties Personnel Inc. (whose president, Christensen, is also a defendant). The three partners owned equal interests in the partnership. Gilbert, Murrell and Christensen were all real estate brokers, and APT's purpose was to invest in particular pieces of real property, including one known as the Fairway Downs Apartments. To raise money, APTS decided to sell a part interest in the Fairway Downs Apartments. Each APTS partner located investors and those investors formed a joint venture, called "F-D Apartments" (F-D), which acquired a 60 percent interest in the Fairway Downs Apartments. The other two plaintiffs, Cohn and McKee, are the investors Murrell brought in to become joint venturers in F-D. The two partnerships, APTS and F-D, together formed a third partnership known as the "Fairway Downs Joint Venture" ("Fairway Downs"). Each partnership has a written partnership (or joint venture) agreement. The F-D agreement was executed in March, 1977, and the Fairway Downs agreement at the same time or shortly thereafter. The APTS agreement was put in writing in May, 1977, although the partnership had been in existence without a written agreement since February, 1976.

The suit concerns an "Agreement for the SALE of REAL PROPERTY" by which F-D purported to sell its 60 percent interest in the Fairway Downs Apartments to third party buyers. Plaintiffs seek to rescind the agreement, claiming that the sale was not authorized under the terms of the agreements of the three partnerships. Defendants are the other partners in APTS and the other partners in F-D ("sellers") as well as the buyers, Ashman and Harel ("buyers"). Other alleged grounds for rescission include breaches of fiduciary duty by various defendants. Plaintiffs also seek an accounting on the basis of the alleged breaches, including the unauthorized sale.

In January, 1980, a meeting of the Fairway Downs Joint Venture was held, at which there was a discussion about selling the building. Murrell stated his understanding that under the partnership agreements all partners of APTS would have to consent to the sale. A second meeting was held in April. Although Cohn and McKee desired to remain investors, they did not attend, believing that Murrell would be able to veto the sale. Two offers were presented, one to purchase the entire property and one to purchase F-D's 60 percent interest. Defendant Samuels, a partner in F-D, moved that the F-D partners accept in principle both of the offers and defer to APTS to decide which one to accept. It is undisputed that under F-D's joint venture agreement the requisite percentage of F-D interests were voted in favor of the motion. ² Defendant Christensen moved that APTS accept in principle the offers and F-D's resolution and begin negotiations with the potential buyers. According to the minutes of the meeting, Murrell declined to vote, "thereby voiding the motion."

At a June meeting of the APTS partnership, one partner moved to approve acceptance of the offer to purchase F-D's 60 percent interest. Murrell voted against the motion. Gilbert and Christensen wrote Weiner, an F-D partner, that APTS had approved the sale by a majority vote and indicated their belief that only a majority vote of APTS was necessary under the agreements. A contract of sale to buyers was executed.

After plaintiffs filed suit for rescission and an accounting, buyers as well as sellers moved for summary judgment. Both groups of defendants also made alternative motions for partial summary judgment on the claim for relief alleging that the sale was unauthorized. Plaintiffs then moved for summary judgment. After defendants' motions were granted and plaintiffs' denied, plaintiffs unsuccessfully requested reconsideration, urging, inter alia, that summary judgment should not have been granted because there were material issues of fact.

A major disagreement between the parties is whether, as plaintiffs argue, the unanimous consent of APTS partners was required before APTS could consent to the sale of F-D's interest in the apartment house. We conclude that the partnership agreement is ambiguous and that the documents before the court reveal a question of fact.

It is not disputed that the Fairway Downs agreement requires at least the consent of APTS as a partnership for sale of F-D's interest in the property that was the subject of the F-D--APTS Fairway Downs Joint Venture Agreement. ³ The question is whether, in order for the APTS partnership to agree to the sale, all of the APTS partners were required to consent.

Defendant sellers first contend that plaintiffs do not have standing to assert violations of the Fairway Downs agreement. They argue that the parties to the Fairway Downs agreement are the two partnerships, APTS and F-D, and that individual partners are not entitled to assert the right of the partnership in an action for breach of the agreement. We need not consider the standing question as it relates to that agreement. Each plaintiff is a party either to the APTS agreement or the F-D agreement and has standing in this action that raises the question whether those agreements were breached. ⁴

The dispute as to the vote required to consent to the sale centers on the APTS partnership agreement, which contains several paragraphs pertaining to decision-making. Regarding construction, it states:

"6. Construction. All matters relating to this Partnership Agreement shall require the affirmative vote of all of the Partners unless it is specifically indicated that a smaller number is required. Whenever it is stated herein that the matter is to be decided by the 'partnership', it shall mean the affirmative vote of the Partners owning more than fifty percent of the partnership interests. A partner shall have a vote in the partnership valued according to his interest in the partnership as determined in paragraph 14 herein."

The provisions of the APTS agreement on which the parties focus indicate different votes required for different kinds of decisions:

"17. Management and Voting. Each partner shall have the power to make ordinary management decisions without consulting the other Partners. In the carrying out of any management decision, a partner may spend up to $500.00 without consulting any of the other Partners. Management decisions relating to non-ordinary matters connected with the operation and affairs of the Partnership, including, but not limited to, the purchase, sale or refinancing of any real property, shall require the unanimous consent of all Partners. Unanimous consent shall also be required for admittance of any new partner.

"18. Relationship of the Partners. Each partner shall be faithful to the other Partners in all transactions relating to the partnership business and give, whenever required, to the other Partners a true statement and accounting of all partnership business transacted by him. No partner shall, without the written consent of the partnership:

"(a) Borrow money in the partnership name for partnership purposes or utilize collateral owned by the partnership as security for such loans;

"(b) Assign, transfer, pledge, compromise or release any of the claims of or debts due the partnership in excess of more than $500.00, except upon payment in full, or arbitrate or consent to the arbitration of any of the disputes or controversies of the partnership;

"(c) Make, execute or deliver any assignment for the benefit of creditors or any bond, confession of judgment, chattel mortgage, deed, guaranty, indemnity bond, surety bond, or contract to sell which has any effect on the property of the partnership;

"(d) Mortgage any partnership real property or any interest therein or enter into any contract for any such purpose;

"(e) Engage, on behalf of the partnership, in any unusual transaction or act outside of...