Medina v. Degroat

• Decision Date: 26 January 2023
• Docket Number: 360539
• Parties: GUILLERMO MEDINA and LILY SELLS, Plaintiffs-Appellants, v. EDWARD J. DEGROAT, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

GUILLERMO MEDINA and LILY SELLS, Plaintiffs-Appellants,
v.
EDWARD J. DEGROAT, Defendant-Appellee.

No. 360539

Court of Appeals of Michigan

January 26, 2023

UNPUBLISHED

Saginaw Circuit Court LC No. 20-041728-CB

Before: Gleicher, C.J., and K. F. Kelly and Letica, JJ.

PER CURIAM

Plaintiffs Guillermo Medina and Lily Sells appeal by right the trial court's entry of judgment in favor of defendant Edward J. DeGroat after a bench trial concerning the meaning of a partnership agreement entered into by the parties. At the center of the dispute is how the profit distributions are to be made. Finding no errors warranting reversal, we affirm.

I. BASIC FACTS AND PROCEDURAL HISTORY

In 1986, defendant and Guillermo entered into a partnership agreement (the "Partnership Agreement") with five other investors, including Guillermo's son, Marlow, to form a partnership called "Towne Center Investments" (the "Partnership"). The purpose of the Partnership was to purchase a commercial office building called the "Vanguard Building." Defendant was to be the managing partner. At the time he entered into the Partnership Agreement, Guillermo had asked Sells to invest in the Partnership as well, but she instead provided defendant with a loan for the purpose of purchasing the Vanguard Building. Marlow's interest was later assigned to Sells, Guillermo's former wife, in 2007 or 2008.

The Vanguard Building was purchased for $2,400,000, which included capital contributions totaling $526,800 from the partners. Specifically, and as relevant here, defendant contributed $207,728, and Guillermo and Marlow contributed $108,160 and $16,224 each respectively. These amounts are listed in the Partnership Agreement next to each partner's name under a column titled "Amount of Initial Contribution." Listed next to the initial contribution dollar amounts is also a percentage. Thus, next to the $207,728 credited as defendant's contribution is the number 70 1/2%, next to Guillermo's is 10%, and next to Marlow's is 11/2%

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These percentages do not, however, equate with the proportion of the capital contribution each partner made to the Partnership. For example, defendant's contribution of $207,728 represents only approximately 39% of the total $526,800 contributed (not 70 1/2%), while Guillermo's $108,160 contribution represents 20% (not 10%).

Under the Partnership Agreement, "[i]n the event of a loss by the partnership, the Investors shall be entitled to share in such loss in the same proportion as their contributions to the partnership." In the event there is a profit "from any source other than the sale or other disposition, the Investors shall share in such profit in the same proportion as their contributions to the partnership." And with respect to profits from the sale of the Vanguard Building, "the Investors shall first receive the amounts of their capital accounts, and any profit over and above the capital accounts shall be distributed to the Investors in proportion to their capital accounts as to their percentage of ownership." It is undisputed that since the beginning of the Partnership, defendant, as the managing partner, has paid each partner profits under the Partnership Agreement according to the percentages listed and not the actual pro rata amount contributed initially by the partners.

According to plaintiffs, the dispute between the parties began after the monthly distribution checks from defendant decreased in amount in 2018. It was at this point that plaintiffs claimed they discovered the discrepancy in the manner in which distributions were being made. On January 30, 2020, Guillermo filed a five-count complaint with the trial court, which he later amended the complaint to add Sells as a party.

The matter proceeded to trial, after which the trial court entered judgment in defendant's favor, concluding that the Partnership Agreement was ambiguous and the extrinsic evidence demonstrated the parties agreed to defendant's method of profit distribution. Plaintiffs moved for reconsideration, which was denied. This appeal followed.

II. STANDARDS OF REVIEW

Issues of contract interpretation are questions of law this Court reviews de novo. Glasker-Davis v Auvenshine, 333 Mich.App. 222, 229; 964 N.W.2d 809 (2020). This Court also reviews de novo the question of whether a contractual provision is ambiguous. Hein v Hein, 337 Mich.App. 109, 115; 972 N.W.2d 337 (2021). "In general, a trial court's legal determinations are reviewed de novo, any underlying factual findings are reviewed for clear error, and ultimate discretionary decisions are reviewed for an abuse of that discretion." Id. "[A] finding is clearly erroneous if the reviewing court is left with a definite and firm conviction that a mistake has been made." Farm Bureau Gen Ins Co of Mich. v ACE American Ins Co, 337 Mich.App. 88, 98 n 5; 972 N.W.2d 325 (2021). A trial court abuses its discretion if it makes a decision that is "outside the range of reasonable and principled outcomes." Komendat v Gifford, 334 Mich.App. 138, 149; 964 N.W.2d 75 (2020). "A trial court necessarily abuses its discretion when it makes an error of law." Ronnisch Constr Group, Inc v Lofts on the Nine, LLC, 499 Mich. 544, 552; 886 N.W.2d 113 (2016).

III. ANALYSIS

On appeal, plaintiffs contend that the trial court erred because the Partnership Agreement was not ambiguous. According to plaintiffs, the Partnership Agreement set forth two different methods for distributing profits on the basis of what the source of the profit was. Thus, if the profit

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came from the sale of the Vanguard Building, the Partnership Agreement allowed for profits to be distributed on the basis of the percentages in the document. If, however, the profit is from any other source, plaintiffs contend the Partnership Agreement unambiguously required...