Miami Subs Corp. v. Murray Family Trust

• Decision Date: 30 December 1997
• Docket Number: No. 95–607.,95–607.
• Citation: 142 N.H. 501,703 A.2d 1366
• Court: New Hampshire Supreme Court
• Parties: MIAMI SUBS CORPORATION v. MURRAY FAMILY TRUST and Kenneth Dash Partnership.

142 N.H. 501

703 A.2d 1366

MIAMI SUBS CORPORATION

v.MURRAY FAMILY TRUST and Kenneth Dash Partnership.

No. 95–607.

Supreme Court of New Hampshire.

Dec. 30, 1997.

Sheehan Phinney Bass & Green, P.A., Manchester (Robert R. Lucic, on the brief), Hogan & Hartson, L.L.P., Washington, DC, (John F. Dienelt, on the brief and orally), for plaintiff.

Wadleigh, Starr, Peters, Dunn & Chiesa, Manchester (Robert E. Murphy, Jr., on the brief and orally, and David C. Dunn, on the brief), for Murray Family Trust.

BROCK, Chief Justice.

The plaintiff, Miami Subs Corporation (Miami Subs), appeals an order of the Superior Court (Barry , J.) finding that Miami Subs: (1) breached a joint venture agreement between the Murray Family Trust (MFT) and Kenneth Dash Partnership and itself; (2) breached its fiduciary duty to Murray Family Trust; and (3) is liable to MFT for damages totaling $241,000 plus attorney's fees and costs. MFT cross-appeals on numerous issues and challenges the Superior Court's (Arnold , J.) pretrial dismissal of one of its cross-claims. We affirm in part, reverse in part, vacate in part, and remand.

In January 1991, MFT, a private trust created by David Murray, and Kenneth Dash orally formed a general partnership, known as the Murray Family Trust and Kenneth Dash Partnership (partnership).

It was created for the purpose of entering into a joint venture with Miami Subs. On January 14, 1991, Miami Subs and the partnership executed a written joint venture agreement (JVA), granting the partnership the exclusive right to develop Miami Subs restaurants in New England.

The JVA provided that the parties would form two corporations to advance the purposes of the joint venture, one to perform franchise service functions and the other to perform development functions. The JVA described itself as "a brief outline for a long term relationship between the parties"; it envisioned the execution of two- and five-year development agreements between the parties that would further define the joint venture's terms. There is no evidence in the record that these agreements were ever executed.

After execution of the JVA, the partnership commenced preliminary development operations, and by March 1991 the first Miami Subs restaurant had opened in Concord. During this time, Dash began undermining the joint venture. In late January 1991, Dash procured a lease site in Windsor Locks, Connecticut. Dash signed the lease in his own name, without informing Murray, but told the president of Miami Subs, C. Ronald Petty, that he intended to transfer the lease to the partnership. In March 1991, Dash informed Petty that he was dissatisfied with the partnership. Petty later spoke with Murray, MFT's consultant, who apparently was unaware of any problems within the partnership. On April 5, Dash asked Miami Subs to grant him the Windsor Locks franchise, and within a week Miami Subs offered it to him. Dash gave Miami Subs a check for $10,000, dated April 12, which was drawn on a partnership account. The check indicated that it was a franchise fee.

On April 17, Dash told Petty that he had withdrawn from the partnership. Miami Subs sent a letter to MFT and Dash, dated April 19, stating that Miami Subs was terminating the joint venture with the partnership "[i]n view of the termination of the [partnership] and also the failure to finalize ... various agreements" contemplated by the JVA. Also on April 19, Miami Subs transferred the Windsor Locks franchise to Dash individually. MFT did not receive the letter from Miami Subs, nor did Dash notify MFT that he had withdrawn from the partnership. It was not until April 23, during a conversation with Petty, that Murray learned of Dash's withdrawal. That day Murray received a copy of the termination letter via facsimile.

Thereafter, MFT attempted to comply with the JVA. MFT opened an additional restaurant in Nashua, and, upon Miami Subs' request, MFT took over construction and operation of the Windsor Locks franchise. During this time, Miami Subs continued to assert that the joint venture had been terminated, but led MFT to believe that another joint venture might be possible.

In December 1991, Miami Subs filed the instant petition against the partnership, seeking a declaration that the joint venture had terminated, and that neither MFT nor Dash had succeeded to the partnership's rights under the JVA. MFT cross-petitioned for (1) specific performance of the JVA; (2) damages for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, and violation of New Hampshire's Consumer Protection Act; and (3) injunctive relief against Miami Subs' continued violation of the JVA and interference with MFT's performance thereunder.

The trial court dismissed MFT's claims under the Consumer Protection Act, RSA chapter 358–A. After a nine-day hearing, the trial court ruled that the partnership dissolved on April 23, 1991, when Murray received actual notice of Dash's withdrawal.

The court found that MFT did not succeed to the partnership's rights under the JVA and that the "dissolution of the partnership simultaneously terminated the [JVA]." Accordingly, the court found that because the JVA granted the partnership exclusive development rights in New England, Miami Subs breached the JVA when it awarded the Windsor Locks franchise to Dash on April 19. The court also ruled that Miami Subs breached its fiduciary duty to MFT by not informing Murray of Dash's individual pursuit of the Windsor Locks franchise and by granting Dash the franchise. Based on these findings of breach, the court denied Miami Subs' request for declaratory judgment, reasoning that Miami Subs had come to court with "unclean hands." See Noddin v. Noddin, 123 N.H. 73, 76, 455 A.2d 1051, 1053 (1983).

The court rejected MFT's cross-claim that Miami Subs breached the implied covenant of good faith and fair dealing, and denied its request for specific performance of the JVA. The court also denied MFT's claim for lost profits damages, finding that MFT's proffered calculations were "too speculative." The court did, however, award MFT damages totaling $241,000, finding that but for Miami Subs' breach, MFT "would have begun recouping" the nearly $200,000 it had invested in development efforts, and that MFT had to expend $41,000 to assume Dash's interest in the Windsor Locks franchise. Finally, the court awarded costs and attorney's fees to MFT.

Miami Subs appeals the trial court's ruling that the JVA terminated after April 19, the findings of breach of contract and fiduciary duty resulting from that ruling, and the award of damages, attorney's fees, and costs to MFT. MFT cross-appeals several of the trial court's rulings, as well as the pretrial dismissal of its cross-claim under RSA chapter 358–A. We address these arguments in turn.

This case involves both a partnership and a joint venture. A joint venture is "an association of two or more persons formed to carry out a single business enterprise for profit." 46 Am.Jur.2d Joint Ventures § 1, at 19 (1994). "[P]arties in a joint venture stand in the same relationship to each other as the partners in a partnership," Coe v. Watson, 126 N.H. 456, 458, 493 A.2d 490, 491 (1985) (brackets and quotation omitted), and courts generally have applied the law of partnerships to joint ventures. See 46 Am.Jur.2d Joint Ventures § 3, at 22–23. Accordingly, we look to relevant law on joint ventures; general partnership law; and the Uniform Partnership Act (UPA), RSA chapter 304–A, to guide our resolution of this appeal. Cf. Eastern Elec. v. Taylor Woodrow Blitman Const., 11 Mass.App.Ct. 192, 414 N.E.2d 1023, 1027 (finding UPA relevant to joint venture with corporate participant only where "just result" will be achieved), review denied, 383 Mass. 890, 441 N.E.2d 1042 (1981). We will "sustain the findings and conclusions of the trial court unless they are lacking in evidential support or tainted by error of law." Southern N.H. Water Co. v. Town of Hudson, 139 N.H. 139, 141, 649 A.2d 847, 848 (1994) (quotation omitted).

Before we proceed, we note that neither Dash nor MFT are parties, individually, to this lawsuit. The trial court treated MFT as being a party in the case, however, and MFT alternately signed pleadings as itself and as the partnership. A remaining partner may assert the rights of a dissolved partnership, as MFT seeks to do in the instant case. See RSA 304–A:35 (1995); cf. Tenney v. Johnson, 43 N.H. 144, 146 (1861) (remaining partner may assert rights of partnership upon death of partner). We will treat MFT as being a party to the case, as the record does not reflect any objection to its presence. See Allied Chemical Co. v. DeHaven, 824 S.W.2d 257, 264–65 (Tex.Ct.App.1992).

To answer the questions before us, we first must determine when the partnership dissolved. To determine the date of dissolution, we must ascertain whether the partnership was at will, for a definite term, or for a particular undertaking. A partnership at will is a partnership that is not formed for a particular undertaking or a specific duration of time. See 59A Am.Jur.2d Partnership § 89, at 282 (1987). In classifying the partnership as at will, the trial court found that the oral agreement between MFT and Dash did not provide for either a particular undertaking or a specific duration. Cf. RSA 304–A:31, I(a) (1995). The record supports this finding.

MFT urges us to conclude that the partnership was for a particular duration based upon the provision in the JVA for execution of two- and five-year development agreements. The provisions of the JVA, which was executed after the partnership was formed, cannot be read to inform the terms of the earlier partnership agreement. Further, MFT's argument that the partnership would continue for "a minimum of two years" expressly recognizes that there was no termination date for the partnership. The trial court did not err in concluding that the partnership was not for a specific...